Preamble

The House met at half-past Two o'clock

PRAYERS

(MR. SPEAKER in the Chair)

PRIVATE BUSINESS

HASTINGS PIER BILL

Lords amendments agreed to.

FELIXSTOWE DOCK AND RAILWAY BILL

Order for consideration of motion read.

Hon. Members: Object.

The Second Deputy Chairman of Ways and Means (Sir Paul Dean): The House will wish to know that the Chairman of Ways and Means has directed that this motion should be set down for Seven o'clock on Monday 21 October.

PETERHEAD HARBOURS (SOUTH BAY DEVELOPMENT) ORDER CONFIRMATION BILL

Order for Second Reading read.

To be read a Second time upon Tuesday 22 October.

Oral Answers to Questions

NATIONAL FINANCE

Inflation

Mrs. Virginia Bottomley: asked the Chancellor of the Exchequer what is the range of estimates he has received from major outside forecasters for the likely rate of inflation by the end of 1985.

Mrs. Rumbold: asked the Chancellor of the Exchequer what is the range of estimates by major outside forecasters available to him for the likely rate of inflation by the end of 1985.

The Chancellor of the Exchequer (Mr. Nigel Lawson): The main outside forecasters on average estimate that inflation as measured by the retail prices index will fall from 7 per cent. now to below 6 per cent. by the end of the year and to 4½ per cent. by the middle of next year.

Mrs. Bottomley: Is this not good news for pensioners, for those looking for work, and for the low-paid, remembering that inflation fuels panic in the elderly, disrupts our competitiveness and gives rise to disputes in pay bargaining? May we be told the average rate of inflation during the past six years compared with the previous five, which included the Lib-Lab pact? Can my right hon. Friend confirm that countries with low rates of inflation also achieve low rates of unemployment?

Mr. Lawson: I agree entirely with what my hon. Friend said—she put it exceptionally well. The answer to the question that my hon. Friend was kind enough to include in her supplementary is that since the Conservative Government took office in 1979 inflation has averaged 9½ per cent. as against 15½ per cent. during the lifetime of the previous Labour Government.

Mrs. Rumbold: In the light of my right hon. Friend's sensible response to the question put by my hon. Friend the Member for Surrey, South-West (Mrs. Bottomley), if he were to increase public sector expenditure by putting more money into capital expenditure and the infrastructure, what response would he get from the forecasters of the rate of inflation in the short-term, medium-term and long-term?

Mr. Lawson: There would be no problem if the increased expenditure on infrastructure were on projects which brought a satisfactory rate of return and were offset by reductions in current expenditure, but those who put forward such proposals seldom, if ever, specify which expenditure should be reduced.
As for the proposals of the Labour party to which my hon. Friend may have been referring, I recall that when the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) was on the same radio programme as I was some time ago he said that if a Labour Government were to be returned inflation would rise. He did not say—this is an interesting omission—how much it would rise.

Mr. Wainwright: When will the Chancellor of the Exchequer respond to the CBI's request today to come out of his bunker and attack inflation by dynamic means rather than giving the country the worst of all worlds by sticking to negative and purely defensive measures?

Mr. Lawson: I note that the director general of the CBI has temporarily recovered the use of his bare-knuckle script writer. I assure the hon. Gentleman that, as I said in my answer, the rate of inflation is coming down, and coming down well. Whether or not that is dynamic, it is certainly not static.

Mr. Skinner: If the Chancellor of the Exchequer feels it necessary to brag about the rate of inflation being lower than previously, why is it necessary for the Government to give Sir Robert Armstrong an extra £24,000?

Mr. Lawson: That matter has been fully debated in the House and has nothing whatever to do with the rate of inflation.

Mr. Budgen: Will my right hon. Friend confirm that the Government's principal objective is still to reduce inflation by monetary means? Will he reassure the House that the Government have no intention of joining the fashionable cry for internationally co-ordinated reflation, justified by the desire to reduce the value of the dollar against other currencies?

Mr. Lawson: I am not quite sure about all the ins and outs of my hon. Friend's unusually convoluted question. He is normally direct and succinct. As for the question of the dollar, on which my hon. Friend ended, I think that it would be healthier for the world economy if the disequilibrium in the United States were to be corrected by some further fall in the Foreign exchange parity of the dollar. Indeed, that appears to be the view of the American Government also.

Dr. McDonald: Is the Chancellor aware that his knockabout replies are no answer to the serious questions put to him by the CBI? If he really thinks that inflation is falling, why does he not, in the words of Sir Terence Beckett,
abandon economic policies which harm our exports and encourage imports"?

Mr. Lawson: Exports are at an all-time high. Indeed, the latest figures for non-oil exports are running at 10 per cent., in real terms, above a year ago. The hon. Lady should withdraw her ill-informed question.

Company Car Tax

Mr. Roger King: asked the Chancellor of the Exchequer what representations he has received advocating a revision of the present limit of 1·8 litres for company car tax purposes to 2 litres.

The Minister of State, Treasury (Mr. Barney Hayhoe): A number of such representations have been received from motor manufacturers and others.

Mr. King: Will my right hon. Friend accept that when the original 1800 cc cut-off point was fixed, a British manufacturer, namely, BL, had an engine which coincided with a figure just below that? BL does not have that engine now, but has engines of 1·6 and just under 2 litres. Why can we not do something thoroughly chauvinistic, nationalistic and dynamic and make it possible for the cut-off point to help our sole remaining British manufacturer by fixing the point at just under 2 litres?

Mr. Hayhoe: My hon. Friend is asking whether we will give careful consideration to the now fairly uniform view of British motor manufacturers that changes should be made. Of course consideration will be given to the request, but, as ever, when changes are made some will gain and some will lose as a result.

Public Expenditure

Mr. Portillo: asked the Chancellor of the Exchequer whether he is planning any changes in the level of public expenditure.

The Chief Secretary to the Treasury (Mr. Peter Rees): No, Sir. The Government have agreed to stick to the public expenditure totals of £139 billion for 1986–87 and £144 billion for 1987–88 published with the Budget.

Mr. Portillo: When the Government next publish new figures on public spending in the Autumn Statement, does my right hon. and learned Friend think that they will publish a fiscal adjustment? Does he agree that fiscal adjustment is given importance way above its merits, that it sometimes sets hares running round in all directions and that it can be damaging to confidence in the economy?

Mr. Rees: I agree with my hon. Friend's analysis. If he and the House look at the Government's response to the eighth report of the Treasury and Civil Service Select Committee, they will see that we state that the published figure for fiscal adjustment is assigned a significance out of all proportion to its very limited value.

Mr. Bell: Does the Chancellor of the Exchequer recall that in his first speech from the Dispatch Box as Chancellor of the Exchequer on that bright confident morning he said:

an essential ingredient in providing the right balance between fiscal and monetary policies"—
[HON. MEMBERS: "Reading."] Of course I am reading, I am quoting.

Mr. Speaker: Order. Not quoting, paraphrasing, please.

Mr. Bell: On that bright confident morning the right hon. Gentleman said that an essential ingredient of the economy was to keep the public sector borrowing requirement under control. Is that the reason why, year in and year out, since he became Chancellor, £3,000 million to £4,000 million worth of national assets have had to be sold? Is that why he is selling them?

Mr. Rees: The hon. Gentleman directed his question at my right hon. Friend, but I hope that he will allow me to answer it, because it arises from a question that I answered earlier. If the hon. Gentleman studies the public sector borrowing requirement, he will see that, apart from the impact of the miners' strike, it has fallen consistently since 1981. That is a very creditable record.

Mr. Marlow: When will the Government cut public expenditure in real terms?

Mr. Rees: Although some individual items have been cut, that is not our declared policy. Our declared policy is to maintain public expenditure broadly stable in real terms.

Mr. Hattersley: To revert to the Chief Secretary's original answer, does that not confirm—indeed, it does — that the only way in which the Government can finance future tax cuts is by selling more national assets?

Mr. Rees: It seems that the right hon. Gentleman underestimates the merits of privatisation for its own sake. Certainly it is true that the sale of public sector assets has been clearly reflected as an item in the accounts, but as I said, we have achieved significant cuts in direct taxation by other means as well.

International Monetary Fund

Mr. Wainwright: asked the Chancellor of the Exchequer when he next expects to attend a meeting of the interim committee of the International Monetary Fund.

The Economic Secretary to the Treasury (Mr. Ian Stewart): In the first half of 1986.

Mr. Wainwright: Are not Treasury Ministers ashamed that they and the Chancellor of the Exchequer are not attending the annual meetings of the International Monetary Fund and the World Bank? Why will they dally in the bunker of the Conservative party conference when the world is crying out for a lead to bring it out of financial anarchy?

Mr. Stewart: The United Kingdom will be fully represented at those meetings. Surely, the hon. Gentleman would expect the leaders of his own party to be present at his party conference. I would agree with that sentiment. Despite the rather aggressive nature of the hon. Gentleman's question, and as this may be the last time that he will appear as the economic spokesman for the Liberal party, may I say that we wish him well in his job in employment. I hope that he will take an early opportunity to say how glad he is to see the rapid rise in new jobs that has occurred during the past two years.

Mr. Merchant: When my hon. Friend—or my right hon. Friend the Chancellor of the Exchequer — next meets his friends—or enemies—in the IMF, will he remind them that employment in Britain rose by 650,000 in the past two years—more than in the rest of the EEC put together? Will he proffer advice to other countries on how to manage their economy?

Mr. Stewart: I am sure that my right hon. Friend has noted my hon. Friend's suggestion. It is indeed true that this country's successful economic policies have generated a much more rapid rise in employment than has taken place in most other industrial countries. The proportion of people of working age at work is higher in this country than in any other industrial countries, except Japan and America.

Personal Taxation

Mr. Meadowcroft: asked the Chancellor of the Exchequer what is the lowest income at which a single person with only a personal allowance is currently paying less income tax than in 1978–79.

Mr. Hayhoe: With the exception of those earning between £2,720 and £5,330 a year, all single taxpayers whose earnings have increased in line with the national average are currently paying less income tax as a proportion of their earnings than in 1978–79.

Mr. Meadowcroft: But is it not the case that a person has to earn over £22,000 a year before he pays a smaller proportion of his salary in tax and national insurance? Why do the Government give benefits to people who earn more than that amount, instead of giving benefits to those who earn less than that? Surely that is highly objectionable when we are trying to make people conform with policies to control the serious economic problems of this country?

Mr. Hayhoe: I think that most people are concerned about their real take-home pay. There has been a real increase in take-home pay for all those whose pay has risen in line with national average earnings since 1978–79.

Mr. Alan Howarth: Notwithstanding the increase in income tax thresholds that the Government have achieved, does my hon. Friend agree that the burden of taxation still rests heavily on the lowest paid? Does he further agree that people—for example, members of the alliance parties—who call for higher public expenditure on a cause—however worthy it may be—are calling for an increase in taxation of the poorest members of our society?

Mr. Hayhoe: I endorse what my hon. Friend says. In reply to what he said about the burden on the low-paid, may I point out that, as a result of the changes in recent Budgets, personal allowances have been increased by 20 per cent. in real terms. Moreover, the changes in the national insurance regime announced by my right hon. Friend the Chancellor of the Exchequer in his last Budget were of particular help to the low-paid.

Johnson Matthey Bankers

Mr. Alton: asked the Chancellor of the Exchequer what further discussions he has had with the Bank of England concerning Johnson Matthey Bankers.

Mr. Skinner: asked the Chancellor of the Exchequer if he will make a further statement regarding Johnson Matthey Bankers.

Mr. Ian Stewart: My right hon. Friend discussed with the Governor the terms of his statement of 17 July, to which I refer the hon. Members.

Mr. Alton: Will the Economic Secretary tell the House how many heads have rolled at the Bank of England as a result of the Johnson Matthey fiasco? As his right hon. Friend told the House that the Bank was too busy to investigate the gaps in the Johnson Matthey records, will he tell us why he did not call in outside assistance?

Mr. Stewart: Staff appointments at the Bank of England are a matter for the Governor of the bank. My right hon. Friend did not say that the present management of JMB was too busy. He said that the affairs of the bank were in a chaotic state and that it took a long time to establish that there were gaps in the documentation.

Mr. Skinner: Will the Minister tell the Chancellor of the Exchequer that, in view of the dilatoriness shown by the Chancellor, the Governor of the Bank of England and all the others in this affair, it would not be taken well if the taxpayer had to foot the legal bill incurred by the Chancellor because of recent events? If the Chancellor is prepared to use more than £100 million of taxpayers: money for this rescue, is it not wrong for the taxpayer also to have to foot the bill for the legal expenses arising out of the writ?

Mr. Stewart: Contrary to what the hon. Gentleman suggests, my right hon. Friend has been punctillious in reporting to the House on the JMB affair. Indeed, last week he made a statement as soon as it became clear that the JMB management wished to invite the City of London police to conduct a preliminary inquiry. As to the writ, I should point out that a writ was served on the auditors on Tuesday, and in response a writ was served by the auditors on my right hon. Friend. That writ will be vigorously contested.

Mr. Marlow: Does my hon. Friend agree that the most important aspect of this affair is the confidence of the City of London and that it was right for the Bank of England to intervene? Is it not also right for the Government to uncover what went wrong so that it does not recur? Is it not least important to make political capital?

Mr. Stewart: There is a lot to be said for my hon. Friend's remarks. Clearly, important lessons have been learnt about banking supervision, and that was the subject of my right hon. Friend's statement to the House on 20 June.

Mr. Dalyell: Will the Minister accept that some of us do not think that the technical officers of the Bank of England were at fault? Will he confirm his total confidence in Mr. Walker and Mr. McMahon?

Mr. Stewart: I do not propose to be led into making comments from the Dispatch Box on any individual official.

Customs and Excise Office, Wick

Mr. Robert Maclennan: asked the Chancellor of the Exchequer what consideration he has given to the future of the present Customs and Excise area office at Wick.

Mr. Hayhoe: As I told the hon. Member in my letter of 15 July, the Wick office is to remain fully operational.

Mr. Maclennan: In view of the excellent facilities at Wick airport and the desire of local development agencies, local authorities and business men to develop links with Scandinavia to promote commerce and tourism, will the Minister view with favour any request to increase customs services at the airport to meet those desirable objectives?

Mr. Hayhoe: The question of customs facilities at the airport is rather different from the question that the hon. Gentleman placed on the Order Paper. When I last reviewed the position at the airport, the amount of traffic did not meet the criteria laid down for customs attendance.

Mr. Kennedy: Is the Minister aware that during a recent Transport Question Time the Minister with responsibility for aviation said that he would be willing to look at the position at Wick and Inverness airports? Is he also aware that in a letter to me of this week he confirmed that the 12 per cent. cut in the number of customs officials since 1979 is only now beginning to be reversed? Is not one of the difficulties the fact that the Government, even if the Treasury makes that welcome facility available, will only be beginning to reverse the problems generated by their policies?

Mr. Hayhoe: Discussions have been going on for a long time about customs attendance at both Wick and Inverness airports. If the criteria for attendance are met, the customs will be in attendance.

Mr. Wilkinson: Will my right hon. Friend bear in mind that proper customs facilities for a wide range of airports in the United Kingdom, including Wick, are necessary for the good conduct of business? Will he make it a Government priority to maximise the use of provincial airports, including those in the Highlands, to which this question refers?

Mr. Hayhoe: Yes. I am all for maximising the use of airports and of resources. Because I am concerned with the maximisation and utilisation of customs resources, I do not want to see them deployed where they will not be fully efficient.

Black Economy

Mr. David Atkinson: asked the Chancellor of the Exchequer what is the most recent estimate of the percentage of national income represented by the black economy.

Mr. Peter Rees: Recent estimates of the size of the black economy have varied from 2 to 16 per cent. of gross domestic product. This very wide range tends to confirm the Government's view that it is not possible to form any reliable estimate of its size.

Mr. Atkinson: I thank my right hon. and learned Friend for that reply. Does he agree that the long overdue bonfire controls on small businesses, recommended by the recent White Paper, "Lifting the Burden", will do much to reduce the size of the black economy? Will he give some thought now to introducing a two-year honeymoon, free of corporation tax, to encourage all new business to become better established?

Mr. Rees: I note my hon. Friend's suggestion about a two-year honeymoon. I doubt whether it would be the most effective way of helping small businesses. Indeed, many new businesses do not make much profit in the first

two years. The most positive assistance that the Government can give to the smaller end of the economy, as my hon. Friend has perceptively pointed out, is our firm determination to lift the burden on it. As the House will know, measures will be co-ordinated by a committee presided over by my noble Friend the Minister without Portfolio.

Mr. Bellingham: Is my right hon. and learned Friend aware that because of the Government's enthusiasm to tackle the informal economy many reputable small firms are being unfairly victimised? Is he not aware that those people are the real wealth creators? Will he ensure that before their accounts are investigated someone very senior satisfies himself that there are reasonable grounds for suspicion?

Mr. Rees: If my hon. Friend will draw our attention to any cases where there has been victimisation. I am sure that we shall make the fullest possible investigation. As he will see from the latest report of the Board of Inland Revenue, the board has concentrated on the larger, rather than the smaller, accounts.

Exchange Rate

Mr. Weetch: asked the Chancellor of the Exchequer if he will make a statement about the exchange rate.

Mr. Lawson: At noon today the sterling index stood at 84·3.

Mr. Weetch: Has the Chancellor of the Exchequer read in today's press the criticism by the director general of the CBI, Sir Terence Beckett, of the rise in the exchange rate? He says that if the exchange rate goes any higher it will unfairly threaten the competitive position of British firms in foreign markets. Does the right hon. Gentleman recall that a few years ago, because of a sharp rise in the exchange rate, which was totally artificial, many soundly based firms in this country ran into serious difficulties? Will the Chancellor tell the House whether he has an exchange rate policy and what it is?

Mr. Lawson: I recall that when sterling was temporarily falling during the early part of this year I was called to the House to answer a private notice question tabled by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who was complaining about the fall. Now I see that the Labour party is complaining about the subsequent recovery.

Mr. Maples: In retrospect, does my right hon. Friend not think that a good time to have joined the exchange rate mechanism of the EMS might have been around the end of January, when the pound-deutschmark exchange rate was about 3·5?

Mr. Lawson: The fundamental question about the EMS is not particularly the exchange rate at which one joins, although that is obviously a matter of significance, but whether it is in the interests of this country to join at all. As my hon. Friend will know, we keep that matter constantly under review, but at the present time we do not think that it is in this country's interests to join.

Mr. Austin Mitchell: The Chancellor seems intent on using the rising pound and record real interest rates to recreate the economic disaster of 1979 to 1981. Is he aware


that the pound is now more than 50 per cent. undervalued in real terms against the deutschmark compared to the average of 1973 to 1976, and that our deficit in manufactured trade with the EEC is now higher than the entire EEC deficit in manufactured trade with Japan? How can we improve the situation with the pound at that valuation?

Mr. Lawson: The plain fact is that our exports, including our non-oil exports, are at records levels and that our balance of payments on current account is in surplus for the fifth or sixth — I think the fifth — year in succession. We are also in our fifth year of steady growth. We have the highest expected growth rate of any country in the Common Market, and it is also higher than that of the United States. If that is a disaster, it is the sort of disaster which the previous Labour Government would have given their eye teeth to get.

Mr. Eggar: Given the present monetary conditions, as measured by MO, what possible reason is there for not reducing interest rates and thus influencing exchange rates?

Mr. Lawson: My hon. Friend will be aware that interest rates have already fallen by 2 per cent. from their peak earlier this year, and the future course of interest rates will be affected by what happens on the foreign exchange markets.

Mr. Terry Davis: Will the Chancellor tell us whether the value of the pound is the result of a deliberate policy decision by the Government, or whether it is simply due to drift?

Mr. Lawson: This is the first time that I have heard of such a recovery being attributed to drift. Although I am happy to accept the Government's responsibility for taking the exchange rate into account in their monetary and financial policy, as they must, they do not have the power to set a particular exchange rate. That is set by the foreign exchange markets.

Mr. Wrigglesworth: Does the Chancellor accept that the levels of domestic interest rates are influencing the exchange rate? Will he listen to the widespread anxieties of industry about increased levels of unemployment and about liquidations later this year if the present levels of interest rates and the present exchange rate continue?

Mr. Lawson: The present exchange rate is almost exactly what it was at the time of the last general election in 1983. Had we taken the advice given during the election campaign by the Social Democratic party and joined the EMS at the then rate, that would have been a fixed rate and we should have remained at it until now. I fail to see what the hon. Gentleman is complaining about.

Interest Rates

Mr. Ray Powell: asked the Chancellor of the Exchequer if he will estimate the impact of the current levels of interest rates on inflation.

Mr. Ian Stewart: The current level of interest rates is maintaining downward pressure on the rate of inflation.

Mr. Powell: Is it not time that the Minister tried to examine yet again the economic policies that the Government are pursuing? Is he aware that hon. Members on both sides of the House are expressing the alarm and

concern that was expressed earlier this week in the Division on the top salary increases? What effect wall the top salary increases have on demands by the trade union movement for an increase in wages and salaries? When will the Minister try to get his calculations right and get his predictions out of a twist? Is it not time that the Minister seriously considered the effect of the Budget, which his right hon. Friend called a Budget for employment, but which, especially in my constituency, turned out to be a Budget for unemployment?

Mr. Stewart: I am sorry that the hon. Gentleman underestimates the importance of the changes in the tax threshold and in national insurance contributions which my right hon. Friend announced in the Budget. They have important implications for jobs and, as I remarked earlier this afternoon, the numbers of people in employment are rising rapidly.
If I may be permitted to come back to the subject of the question, I point out to the hon. Gentleman that it is the Government's policy to maintain interest rates at whatever level—but not above that level—is needed to exert downward pressure on inflation. [Interruption.] In loosening monetary conditions today we do not want to encourage further inflation tomorrow.

Mr. Dickens: Following his royal highness' remarks on the ITN news at lunchtime, does my hon. Friend accept that we are moving towards a home-ownership democracy in this country and that, as such——

Mr. Speaker: Order. The question must be related to inflation.

Mr. Dickens: It is. Does my hon. Friend agree that the tax relief on mortgage interest payments is an important part of the encouragement given to people to stand on their own feet and to own the house in which they live? That being so, will my hon. Friend take this opportunity to tell people today— —

Mr. Speaker: Order. The hon. Gentleman should have thought about his question before he asked it.

Mr. Blair: What price does the Economic Secretary say that we shall have to pay for this high interest rate policy in terms of mortgage costs, company liquidations and the cost to industry? As Treasury forces, not market forces, are keeping interest rates at their present artificially high levels, can the hon. Gentleman tell us when they will be reduced to the levels enjoyed by our main competitors?

Mr. Stewart: I remind the hon. Gentleman that interest rates have already been reduced by 2 per cent. from their level at the time of the Budget. There are always difficulties that raising interest rates cause in the short run, but the difficulties caused in the long run by a failure to take appropriate action on monetary conditions are far greater.

National Wealth

Mr. Greenway: asked the Chancellor of the Exchequer if he will estimate the overall change in the level of the nation's wealth since 1979.

Mr. Lawson: By the time of the Budget, the nation's real output was 6 per cent. higher than in 1979, and growth this year is expected to be the fastest in the European Community and to exceed that of the United States as well.

Mr. Greenway: I congratulate my right hon. Friend on those substantial achievements. Is it not a fact that more schools, hospitals and nurses, and higher pay for everyone, are best achieved by increased wealth, rather than by much higher personal taxation and the punitive taxation of ordinary people's pension funds which have been earned through a lifetime of work, which is proposed by the Labour party?

Mr. Lawson: The Labour party's proposals on pension funds are as obscure as its proposals on a number of other policies, such as the compulsory repurchase of shares in privatisation issues and the unfettered right to buy council homes. No doubt they will be made clear in due course.
I entirely agree with my hon. Friend that the only way in which we can have social services of the kind that we would all like to see in this country is by first generating the wealth that will pay for them.

Mr. Dubs: How much of the increase in our wealth since 1979 has been due to North sea oil?

Mr. Lawson: A very small part. Of the rate of growth of about 3 per cent. a year that we have seen since the trough of the recession, about ½ per cent. has been due to North sea oil. The other 2½ per cent. has been due to the onshore economy.

Mr. Neil Hamilton: Does my right hon. Friend agree that the growth rate in this country would have been greater if the tax burden had been lower, but that that could have been achieved only if the burden of public spending had been lower? Does he therefore agree that it would be a jolly good thing if our right hon. Friend the Chief Whip were to call the spending Ministers into his office in groups of six and give them a good talking to about loyalty to the Government's objectives?

Mr. Lawson: I note that that particular tactic by my right hon. Friend the Chief Whip did not have much effect on my hon. Friend.

Interest Rates

Mr. Hayes: asked the Chancellor of the Exchequer when he will next be having discussions with the Governor of the Bank of England about interest rates; and if he will make a statement.

Mr. Hirst: asked the Chancellor of the Exchequer if he will make a statement on the current level of interest rates.

Mr. Lawson: The Governor and I regularly discuss interest rates in the context of the monetary policy and conditions. Short-term interest rates have fallen by around 2 per cent. since January. Rates will continue to be held at whatever level is needed to maintain monetary conditions that will keep steady downward pressure on inflation, but no higher than that.

Mr. Hayes: Does my right hon. Friend agree that an attitude of excessive caution towards interest rates can only damage prospects for employment and economic recovery? Does he further agree that a 2 per cent. cut in mortgage rates would cut inflation by 0·6 per cent. and help industry to contain its costs?

Mr. Lawson: It is the responsibility of industry to contain its own costs. It must accept that responsibility,

and it cannot look to advantageous reductions in mortgage rates—much as we would wish to see those—to do the job for it.

Mr. Hirst: While I welcome the recent reduction in interest rates, may I ask my right hon. Friend whether he agrees that real interest rates are still too high and constitute a severe disincentive to businesses and home buyers? In view of the more encouraging predictions about inflation and the recovery of sterling, what hope does he hold out for a reduction in interest rates later this year?

Mr. Lawson: I hold out hope that there will be a reduction in interest rates at the appropriate time. However, if there is one thing substantially worse than the present, relatively high real rates of interest—although they are not so very much higher than in other countries —it is the negative real rates of interest that obtained during the inflationary 1970s. No capitalist society or economy can survive with rates such as those.

Mr. Austin Mitchell: Will the Chancellor explain why our interest rates are not only at record real levels but are one third higher than those in the EEC and double those in Japan? Will he further explain why every mortgage, hire purchase contract, overdraft and unit of local government is being crippled by high interest rates just to keep the pound at an overvalued level?

Mr. Lawson: There is no way of controlling monetary policy without holding interest rates at a level high enough to keep that control; and there is no way of controlling inflation without having proper control of monetary conditions.

Sir William Clark: Does my right hon. Friend agree that a 1 per cent. cut in interest rates would improve the competitiveness of British industry to the extent of £250 million in a year? Does he further agree that if we could achieve a 1 per cent. cut in labour costs the benefits to British industry would exceed £1,000 million a year?

Mr. Lawson: I agree with my hon. Friend's comparison. Indeed, I recall drawing that comparison myself on an earlier occasion, but it certainly bears repetition. His remarks point to an important problem in our economy— the high rate of growth in labour costs per unit of output in this country compared with that of our main competitors overseas.

National Economic Development Council

Mr. Tony Lloyd: asked the Chancellor of the Exchequer when he next intends to meet the National Economic Development Council to discuss the management of the economy.

Mr. Peter Rees: My right hon. Friend will chair the meeting of the NEDC on 25 September next.

Mr. Lloyd: Will the Chancellor tell the National Economic Development Council that the Government have abandoned manufacturing industry, thereby abandoning regions such as the north of England, Scotland, the midlands, Wales and Northern Ireland, all of which have traditionally depended on that industry? When will the Government take seriously the plight of the unemployed in those areas?

Mr. Rees: My right hon. Friend will give no such message to the NEDC, because it would be totally


inaccurate. For example, I remind the House that the investment survey of the Department of Trade and Industry shows that there will be a 10 per cent. increase in manufacturing investment in 1985.

Sir Peter Tapsell: A central feature of economic management that has always been required by the medium-term financial strategy has been that the PSBR should represent an ever-falling proportion of GDP. When our right hon. Friend the Chancellor next meets the National Economic Development Council, will he explain both to it and to the country why we now have a PSBR that is proportionately among the lowest of any industrial country, combined with an interest rate structure that is double that of most of our industrial competitors?

Mr. Rees: As a matter of fact, my hon. Friend should note that the German deficit as a proportion of GDP is lower than ours. Their industrial performance—and it gives me no pleasure to say so—is also rather better than ours.

European Monetary System

Mr. Freeman: asked the Chancellor of the Exchequer what representations he has received from the Confederation of British Industry in 1985 on the United Kingdom joining the European exchange rate mechanism.

Mr. Ian Stewart: The CBI has stated that its present view is that the United Kingdom should join the exchange rate mechanism of the European monetary system.

Mr. Freeman: Does my hon. Friend agree that our excellent export performance can be improved only if business men believe that we have stable interest rates, particularly in relation to our European partners? Does he also agree that one way of achieving stable exchange rates is for Britain to announce at an early moment that we will join the exchange rate mechanism?

Mr. Stewart: My right hon. Friend the Chancellor explained a while ago that the Government's policy is to keep the question of membership of the EMS under review and that we have not judged that circumstances are right for us to join. My hon. Friend referred to both interest and exchange rates. The greater the stability with one, the greater the likelihood of instability with the other.

PRIME MINISTER

Engagements

Mr. Allen Mckay: asked the Prime Minister if she will list her official engagements for Thursday 25 July.

The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. Following my duties in the House, I shall be leaving for a brief visit to Washington.

Mr. McKay: In view of what happened at the trials of mineworkers in Sheffield recently, and in view of the right hon. Lady's statement that it would be better to go down in history as a compassionate lady rather than as the iron lady, should she not use her good offices now to persuade the National Coal Board to use the board's time-tested, time-tried and time-trusted conciliation and consultation machinery, which dealt with similar cases prior to the

The Prime Minister: I believe that we have plenty of machinery for the Coal Board to deal with colliery closures or with appeals against dismissals, as the hon. Gentleman is well aware. With regard to his earlier remark, one sometimes needs a touch of steel. There is nothing wrong with that. Sometimes one needs a good deal of compassion, and there is nothing wrong with that either.

Mr. Wiggin: Is my right hon. Friend aware that tomorrow, while the media of Bristol are occupied with the Queen's visit, the Secretary of State for the Environment will be announcing his decision on the Avon county structure plan? This decision is not likely to be acceptable to the people of the county of Avon, and especially to my constituents. Will my right hon. Friend instruct her Ministers to listen, and perhaps set an example herself by listening, with much greater care to the views of her supporters? Otherwise, she will not have so many of them.

The Prime Minister: I know that my hon. Friend feels strongly about the Avon structure plan, and also about certain matters of planning and development. I think that he and my colleagues will be the first to understand that it is difficult to strike a balance between those who do not wish there to be much more planning permission in a particular area, and those who wish to make provision for more jobs and more housing for certain purposes. My right hon. Friend the Secretary of State will have to strike that balance, and I hope that my hon. Friend will be satisfied with what he does when the announcement is made.

Mr. Hattersley: While the Prime Minister is in America, will she tell Vice President Bush why we, unlike the United States, have not withdrawn our ambassador from South Africa? Will she tell him why we, unlike the Congress and Senate of the United States, have not attempted to ban new investment in that apartheid regime?

The Prime Minister: While these events are taking place in South Africa, it is important that we have first hand reviews of them from our ambassador there. We cart carry out a considerable duty in doing that.
I believe that the US Administration is against sanctions and disinvestment, and the right hon. Gentleman will be aware of what Helen Suzman recently said about them:
Many are presently under consideration with disinvestment and sanctions much to the fore. Campaigns and such actions have indeed reached tidal wave proportions in the United States of America. If I thought that these would work, they would have my unconditional support.
Mrs. Suzman went on:
Not only do I not believe these campaigns would be effective; I believe they would be counter-productive.

Mr. Hattersley: At first hearing that seems like the feeblest sort of excuse, but I have no doubt that the Prime Minister believes her answer, because she is wholly incapable of understanding the importance of giving a moral lead on this or any other matter.

The Prime Minister: I do not think that the right hon. Gentleman could, likewise, accuse Mrs. Helen Suzman of failing to give a moral lead. She was very clear in the advice that she gave. The Government believe that it is correct, and that sanctions would hit the black population of South Africa very badly and, as Mrs. Suzman said, be counter-productive. That is the view that we shall continue to hold.

Sir Anthony Kershaw: Will my right hon. Friend note with satisfaction that last year this country gave £95 million for famine relief aid, without reducing other aid programmes? Nevertheless, does she agree that our long-term aid programme is for development, and will she say that she will not allow that programme to suffer?

The Prime Minister: My hon. Friend is correct. The greater part of the aid programme goes to capital development and is tied to jobs in this country. I believe that most people in the House would agree with that. We also give a considerable amount to the poorer countries. Nevertheless, a considerable fund is set aside for disaster relief, and there is a contingency fund. I believe that we have very good arrangements for aid. The amount of aid that we give, coupled with the amount that goes privately and with private investment, gives this country an excellent record on its all-round aid programme.

Mr. Steel: When the Government Chief Whip on Tuesday night offered the prospect of the Prime Minister's resignation, did he do so with, or without, her authority?

The Prime Minister: I have to disappoint the right hon. Gentleman. I am here, and will remain here. I am delighted to suffer attacks from the right hon. Gentleman. It means that I am usually right.

Mr. Nellist: asked the Prime Minister if she will list her official engagements for Thursday 25 July.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Nellist: Before the Prime Minister leaves this afternoon to address the Capitalist Internationale, will she comment on today's report on the inquiry into British housing, which specifically criticises the Government's single-minded emphasis on owner-occupation as having certain dangers? [HON. MEMBERS: "Reading".] Does she not recognise that it is at least true for working-class families in areas such as Coventry and Liverpool, and for others whose councils' funding will be cut later this afternoon? Before the Prime Minister leaves the country, will she give a guarantee that she will meet the wives and families of Liverpool councillors, who are in the House this afternoon and who handed in such a request to No. 10 Downing street at 2 o'clock?

The Prime Minister: Before I leave this afternoon I shall be happy to respond to the hon. Gentleman by giving some of our record on housing. Since May 1979, more than 450,000 local authority and new town dwellings have been renovated — a higher number than in previous years. Secondly, 50 per cent. more homes were renovated with the help of grants between 1979 and 1984 than in the previous five years. Thirdly, during our time the dwelling stock has risen by 1·1 million houses, and 1·25 million new homes have been built since 1979. I can go on longer if the hon. Gentleman wishes me to do so.

Mr. Dickens: Will my right hon. Friend take this opportunity to confirm that the Government have no intention of tampering with the tax relief given on mortgage interest payments?

The Prime Minister: I am happy to repeat what I have frequently said from this Dispatch Box and shall be saying many times in the future. So long as I am here, tax relief on mortgages will continue.

Mr. Donald Stewart: asked the Prime Minister if she will list her official engagements for Thursday 25 July.

The Prime Minister: I refer the right hon. Gentleman to the reply that I gave some moments ago.

Mr. Stewart: In view of the opposition in Scotland to the sale of the Trustee Savings bank in Scotland, and in the light of the litigation before the Court of Session, will the Prime Minister give a categorical undertaking to the House that no legislation in this place will pre-empt or stultify the findings of the Scottish court?

The Prime Minister: As the right hon. Gentleman knows, the findings of the Scottish court must be obeyed. If the House wished to bring forward any further legislation, that would be a matter for the House.

Mr. Watts: Is my right hon. Friend aware that out of about 4,500 people in my constituency who are claiming unemployment benefit, only 418, fewer than one in 10, have bothered to register their skills with the jobcentre, where more than 800 vacancies are available? Will she discuss with our right hon. Friend the Secretary of State for Employment the advisability of reintroducing the registration of the unemployed at jobcentres, especially in areas such as my constituency of Slough, where there are serious skill shortages?

The Prime Minister: I am very much aware of the position in my hon. Friend's constituency, where, although there are considerable numbers of unemployed, there are, nevertheless, considerable skill shortages. We are considering how best to deal with this matter and at present it is not our intention to require registration at jobcentres. One of the problems is that many of the jobs which are available are not registered at jobcentres, as employers prefer to fill them direct. However, we are reviewing the whole matter and I am grateful for my hon. Friend's views.

Mrs. Clwyd: asked the Prime Minister if she will list her official engagements for Thursday 25 July.

The Prime Minister: I refer the hon. Lady to the reply that I gave some moments ago.

Mrs. Clwyd: Before the Prime Minister leaves the country today, will she reflect on the fact that the majority of my constituents hope that she will never come back?

The Prime Minister: I hope that they will be disappointed, but I cannot believe that the hon. Lady would necessarily say that of the majority of her constituents, who, I believe, would relish political debate.

Mr. Michael Brown: asked the Prime Minister if she will list her official engagements for Thursday 25 July.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Brown: With regard to the United Kingdom's relationship with the Turkish Government, I wonder whether my right hon. Friend, notwithstanding the disappointment that we had when we failed to get the contract for the Bosphoros bridge, will acknowledge that a letter sent to her by the Prime Minister of Turkey shows that there is tremendous trade potential over a number of projects? Would my right hon. Friend care to share with the House the view that tremendous business opportunities exist between this country and Turkey?

The Prime Minister: As I think my hon. Friend is aware, exports to Turkey rose last year and continued to rise in the first five to six months of this year. We believe that there are good export opportunities and we are, therefore, keeping under review the amount of medium-term credit.

Mr. Spearing: Is the Prime Minister aware that the minutes of the report of the Foreign Affairs Committee yesterday, and the events surrounding the weekend of 1 and 2 May 1982, show that some members of the Committee prevented others from putting questions to her in writing? Will she now answer one of them, namely, what was the purpose and object of the second visit of the then Foreign Secretary, the right hon. Member for

Cambridgeshire, South-East (Mr. Pym), to Washington and New York over the period of that second fateful weekend?

The Prime Minister: I have given very full answers on this matter in the past. I have nothing more to add except to say that we debated the matter on 18 February 1985 when the House voted by 351 votes to nil
That this House recognises that the sinking of the General Belgrano was a necessary and legitimate action in the Falklands Campaign; and agrees that the protection of our Armed Forces must be the prime consideration in determining how far matters involving national security and the conduct of military operations can be disclosed."—[Official Report, 18 February 1985; Vol. 73, c. 737.]
None of the four hon. Members who signed the minority report of the Select Committee voted against that motion.

Business of the House

Mr. Roy Hattersley: May I ask the Leader of the House to state the business for the first week after the summer Adjournment?

The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen): The business for the first week after the summer Adjournment will be as follows:
MONDAY 21 OCTOBER—There will be a debate on industrial innovation and design on a motion for the Adjournment of the House.
Second Reading of the Housing Bill [Lords], the Housing Associations Bill [Lords], the Housing (Consequential Provisions) Bill [Lords] and the Landlord and Tenant Bill [Lords] which are all consolidation measures.
Proceedings on the Weights and Measures Bill [Lords] which is also a consolidation measure.
The Chairman of Ways and Means has named opposed private business for consideration at seven o'clock.
TUESDAY 22 OCTOBER — Remaining stages of the European Communities (Finance) Bill.
Motion on the Rate Support Grant (Scotland) (No. 3) Order.
WEDNESDAY 23 OCTOBER — Opposition Day (20th Allotted Day). The subject of debate is to be announced.
Motion on the Nursing Homes and Nursing Agencies (Northern Ireland) Order.
Motion on the Parliamentary Constituencies (England) (Miscellaneous Changes) Order.
THURSDAY 24 OCTOBER—There will be a debate on a motion to take note of the outstanding reports of the Committee on Public Accounts to which the Government have replied.
Motion on the European Communities (Definition of Treaties) (North Atlantic Salmon Conservation Organisation) Order and the European Communities (Immunities and Privileges of the North Atlantic Salmon Conservation Organisation) Order.
FRIDAY 25 OCTOBER — There will be a debate on alternative sources of energy on a motion for the Adjournment of the House.
The House may also be asked to consider any other Lords amendments and messages which may be received.
It may be for the convenience of the House if I indicate that Government business will also be taken in the week beginning 28 October. It is expected that the new Session will be opened on Wednesday 6 November.

Mr. Hattersley: After yesterday's report by Mr. Justice Popplewell on the safety and security of football grounds, will the Government make a statement, later today or tomorrow, on what further action they propose to enhance safety and security? The football season is barely a month away and funds are not available to meet the suggestions in the Popplewell report.
Secondly, presumably between now and our return, the Foreign Office will be preparing its reply to the report of the Select Committee on Foreign Affairs into the sinking of the General Belgrano. Is it the intention of the Foreign Secretary to prepare comments on the minority as well as the majority report?

Mr. Biffen: The right hon. Gentleman will appreciate that the Popplewell statement yesterday was very

comprehensive and enabled the House to consider the topic. I will draw the attention of my right hon. and learned Friend the Secretary of State for the Home Department to the right hon. Gentleman's point.
I shall draw the attention of my right hon. and learned Friend the Secretary of State for Foreign and Commonwealth Affairs to any observations that the right hon. Gentleman may make on the Select Committee's report.

Sir Dudley Smith: Is my right hon. Friend aware that there are laws in this country on discrimination against blacks, women and the disabled? That is quite right. Does my right hon. Friend think that it is time that, given the problem of unemployment, there was a debate in the House on discrimination against those who are over 50, who are able but who do not get jobs because of the system?

Mr. Biffen: My hon. Friend raises a point that may well be considered in the new Session. No doubt he realises that, at the beginning of the new Session especially, there will be ample opportunity to make many speeches on these topics without there necessarily being a specific debate.

Mr. A. J. Beith: When we return, may we have a debate on pay comparability in the public sector, as by then the implications of the Government's decision on top salaries will have fed into all the negotiations taking place in the public sector, including the teachers' negotiations, and we shall need to discuss the subject?

Mr. Biffen: I have no doubt that the topic referred to by the hon. Gentleman will very much feature in the political debate come October, but no doubt he realises that no specific provision has been made for it during the first week of the new Session.

Mr. Ivan Lawrence: Is it the Government's intention to continue sittings of the House throughout the week of 28 October until such time as the Water (Fluoridation) Bill is secure, or do they intend to drop the beastly and unpopular measure?

Mr. Biffen: I think that it was Asquith who said, "Wait and see", but, even if it was not, it is a very good answer.

Mr. Alfred Dubs: In her speech to the American Bar Association, the Prime Minister said that this country must provide no haven or escape for terrorists. Is the Leader of the House aware that five Italian Right-wing terrorists who were convicted in Italian courts are living in this country, and that there appears to be no desire by the Government to deport them or remove them? Is the right hon. Gentleman further aware that, in a letter to me, the Home Secretary gave as one of the reasons for inaction the fact that EC law makes their removal difficult? If that is so, may we have an early report on the implications of this matter, because I find it astonishing, as do many hon. Members, that EC law should make it impossible for us to remove convicted Fascist terrorists from this country?

Mr. Biffen: I am aware of the facts that the hon. Gentleman has mentioned, not least because of press coverage. I will certainly draw the attention of my right hon. and learned Friend the Home Secretary to the point that the hon. Gentleman raises.

Mr. Ian Lloyd: As we have begun this afternoon to look once again down the long vista of a new Session, in which, if nothing is done, we shall no doubt again suspend our Ten o'clock rule on three nights out of four, and as the Procedure Committee has suggested some very important measures which would enable the House to conduct its business in a somewhat more civilised and no less effective manner, may we have an early opportunity of discussing that debate and of the House expressing its views on the recommendations?

Mr. Biffen: I take account of the point that my hon. Friend has made, but no provision has been made for it in the business announced today.

Mr. Bill Michie: As the Government are in a state of complete disarray, instead of working out the programme for after the recess, surely they ought to call it a day before the whole nation finishes up in the knacker's yard.

Mr. Biffen: Life must look very jaundiced from where the hon. Gentleman sits; when I look across the House, I understand why.

Mr. Robert McCrindle: Is it the Government"s intention, either in the tail end of this Session or early in the next, to give the House an opportunity to discuss the possibility of televising its proceedings?

Mr. Biffen: I have already given what I considered to be a clear indication of what I hope the progress will be in this matter. I do not think that I can helpfully add to it.

Mr. Don Dixon: Has the right hon. Gentleman had time to read early day motion 915 in the name of my hon. Friend the Member for Ogmore (Mr. Powell)?
[That this House calls upon the Government to honour their legal obligation as signatories of the 1960 Treaty of Establishment which guaranteed the Sovereignty of the Republic of Cyprus, recognising that on 20 July 11 years will have lapsed since the invasion of Cyprus by Turkish military forces that still occupy 40 per cent. of the island despite repeated resolutions from the United Nations with the unanimous support of the Security Council demanding their withdrawal; further expresses grave concern regarding the 200,000 Greek Cypriots who are deprived of their homes, land and property and made refugees in their own country; regards this unique situation in the 20th century as most intolerable; urges positive action to find an equitable solution to the problem for the people of Cyprus; and demands further stronger international pressure so that justice and freedom can prevail.)
Will the Government find time to debate the situation in Cyprus? It is now more than 11 years since Turkish troops invaded the island. Is it not time that the House debated the situation there?

Mr. Biffen: The situation in Cyprus and all that derives from the invasion is certainly a matter which constantly demands the attention of the House. However, no Government time is available for a debate in the week when we come back.

Dr. Keith Hampson: My right hon. Friend is aware of the growing concern in British manufacturing industry about the increasing difficulties of winning competitive contracts owing to the concessionary

credit being accorded by foreign Governments. Will there be an early statement on the Government's intentions about taking better initiatives on aid packages?

Mr. Biffen: I will certainly draw the attention of my right hon. Friend the Secretary of State for Trade and Industry to the point made by my hon. Friend about the widespread use of soft credit by our competitors. My hon. Friend will also have noted that the Department of Trade and Industry is top for questions on Wednesday 23 October.

Mr. Tom Cox: Is the Leader of the House aware that the prison population is now at its highest and that the cost of keeping people in prison is well over £200 a week? Against that background, when will the House have an opportunity to discuss conditions within our prisons? It is a long time since we had such a debate.

Mr. Biffen: The hon. Gentleman raises a valid point of general public concern. He will be aware that the Home Office is top for questions in the week that we return after the recess. In the meantime, I shall refer his point to my right hon. and learned Friend the Home Secretary.

Dr. Brian Mawhinney: Two weeks ago, I invited my right hon. Friend to ask the Home Secretary whether he would make a statement to the House on possible legislation in the next Session of Parliament to withdraw from drug traffickers their ill-gotten gains? As my right hon. and learned Friend the Home Secretary has not felt able to make such a statement, does my right hon. Friend the Leader of the House know whether any legislation on this subject will be introduced in the next Session of Parliament?

Mr. Biffen: My hon. Friend raises a very important point which will command assent in all parts of the House. He will appreciate that I cannot anticipate what will be contained in the Queen's Speech. I hope that my hon. Friend will not be too pessimistic.

Mr. Archy Kirkwood: Has the Leader of the House considered whether he can find time to debate the collapse of Kestrel Communications Ltd. and its implications, as recently reported on the BBC's "Watchdog" programme? Does he agree that it is extraordinary that pensions broker can, by devising a scheme to employ people for one day, unlock people's frozen pensions at the same time as conning major pensions funds, the Inland Revenue, the Occupational Pensions Board and the Manpower Services Commission into approving the scheme to the extent that 270 people lost most of their life savings? Should there not be a more effective watchdog with effective teeth in some of the bodies available to protect people against such abuses?

Mr. Biffen: The hon. Gentleman will excuse me if I do not comment upon the details of that instance. No Government time has been made available for such a debate in the first week when we return after the recess. I wish the hon. Gentleman every success in whatever initiatives he may try to undertake on his own account.

Mr. Peter Bruinvels: In view of the fact that the cost of running the House has escalated from £56·2 million in 1981–82 to £77·5 million in 1984–85, what proposals will my right hon. Friend introduce in the next Session to trim the appalling costs, bearing in mind


that it is suggested that our debates will be broadcast into our own offices and that Parliament will be televised? That will cost a lot of additional money for something which most people do not want. Can my right hon. Friend give us some ideas?

Mr. Biffen: I must say that over the last 48 hours I have had some dark thoughts about weed killer, but I require notice of such a question so that I can give a proper and measured reply.

Mr. Roland Boyes: Has the Leader of the House had an opportunity to read Amnesty International's latest report on Turkey? The report states that torture of political detainees in Turkey remains widespread and systematical. Will the right hon. Gentleman join me in condemning torture in Turkey? Will he oppose any integration of Turkey into the EEC and other European Community institutions? Will he arrange for an early statement to be made on the Government's policy and attitude towards Turkey?

Mr. Biffen: I take account of what the hon. Gentleman says. I will draw the attention of my right hon. and learned Friend the Secretary of State for Foreign and Commonwealth Affairs to the point that the hon. Gentleman makes.

Mr. Gerald Howarth: Between now and when we return in October, it is likely that a decision will be taken on the European fighter aircraft. Will my right hon. Friend assure us that we shall have the opportunity to debate that matter as soon as we return? In the meantime, can he assure all hon. Members that he will represent to my right hon. Friend the Secretary of State for Defence the grave anxiety felt by hon. Members that a compromise might be reached that will produce an aeroplane that does not meet the requirements of the Royal Air Force?

Mr. Biffen: I cannot anticipate when a decision will be reached on the project, but I recognise that it is of great interest to hon. Members and, indeed, to the country generally. I shall be in close touch with my right hon. Friend the Secretary of State for Defence about how the matter should be handled.

Mr. David Winnick: In view of the report published today about the formidable housing crisis in the country, will the right hon. Gentleman bear in mind the need for an early debate on housing? With regard to the remarks made by the Prime Minister, is the Leader of the House aware that since 1979 there has been a cut in real terms of 68 per cent. in public expenditure on housing? Does not that explain the sort of conditions in which so many people are forced to live because they have no means of obtaining adequate rented accommodation?

Mr. Biffen: I suspect that the hon. Gentleman has chosen a statistic that is only one component of the housing situation.

Mr. Winnick: A true one.

Mr. Biffen: That may be so, but it may not truly reflect the full range of housing expenditure. We should be delighted to debate the housing record of the Government.

There will soon be a Gracious Speech and the debates that follow will provide an early opportunity to discuss housing.

Mr. Tony Marlow: If a week is a long time in politics, surely three months is an age in the affairs of the European Community. Will my right hon. Friend explain to those of us who are less knowledgeable about procedures in the House precisely how long we shall have after the House resumes to table amendments to the European Communities (Finance) Bill?

Mr. Biffen: I shall be happy to contact my hon. Friend to give him the most accurate answer that I can, based on the most qualified advice. I am sure that my hon. Friend will spend most of the holiday, after its initial joy has worn off, by returning to his first love of Brussels bashing. I cannot believe that he will come back without a fistful of amendments.

Mr. Tam Dalyell: Does the Leader of the House recollect that one of the most considerable of his predecessors, the late Mr. lain Macleod, used the phrase "parliamentary sleight of hand"? Did not the Prime Minister's answer to my hon. Friend the Member for Newham, South (Mr. Spearing) come into that category? Although there was a debate on 18 February, many of us were asked, rightly, not to vote until our parliamentary colleagues had reached an informed decision. That has now happened, so is it not important that the right hon. Member for Cambridgeshire, South-East (Mr. Pym), for example, should give his view of events?
When was the last time that four Members of the House of Commons, using their own resources and without the help of Clerks of the House, produced a massive and serious report? This is a House of Commons rather than a party political matter. It is important that a minority report that has been produced in such a way for the first time should be seriously debated. It is not sufficient to say, in answer to my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley), "I will consult the Foreign Secretary. "Ought not there to be a debate on the matter?

Mr. Biffen: I say at once that the hon. Gentleman has a well-documented commitment and enthusiasm for the subject, but he must not suppose that it is rare to have a minority report on a Select Committee recommendation, because it has happened frequently in the past. However, I agree that it is a matter of continuing parliamentary interest, and I shall take account of the hon. Gentleman's remarks when considering how the matter should be handled in the future.

Mr. Anthony Steen: I draw the attention of my right hon. Friend to early-day motion 796 which is in my name and that of 151 right hon. and hon. Members.
[That this House calls upon the Government to reaffirm its commitment to conservation of the environment and open space and to the sanctity of national parks as enshrined in Department of the Environment Circular 4 of 1976 that no new route for long distance traffic should be constructed through a national park, or existing road upgraded, unless it has been demonstrated there is a compelling need which could not be met by any reasonable alternative means; and applauds the decision of the Joint Select Committee of Peers and honourable Members which refused to permit the violation of the Dartmoor


National Park by the building of a dual-carriageway through the open spaces of Bluebell Woods and East Hill, and which affirmed that a northern route outside the Dartmoor National Park offered a reasonable alternative means of bypassing Okehampton.]
Will my hon. Friend explain to the House why at 11 o'clock this morning there appeared on the television screens notification to the effect that a statement would be made this afternoon, presumably by the Secretary of State for the Environment, about whether the Okehampton bypass should go south or north and then at 1 o'clock that notification disappeared from the screen? Will my right hon. Friend explain why that happened and when a statement will be made, bearing in mind that the southern route can be built by 1998 and the northern route by 1990 if he got on with it?

Mr. Biffen: It is the first I have heard about a statement on the screen at 11 o'clock this morning. I will look into the matter.

Mr. Dave Nellist: When the House returns towards the end of October, could the Leader of the House arrange for a debate on law and order? We could then compare the 10,000 arrests and 600 sackings of miners during 1984–85 with the 9,000 employers in 1984 who were guilty of illegally underpaying workers—particularly young workers—of whom two were prosecuted and average fines imposed were £107. Would not that debate reveal the hyprocrisy of his so-called party of law and order?

Mr. Biffen: I cannot undertake that there will be such a debate in the first week after the recess. However, I am certain that that topic will feature in the political controversies that will follow the Queen's Speech.

Mr. Tony Speller: May I congratulate my right hon. Friend on arranging a debate on clean, renewable alternative energy sources—the first for many a long day in this House—and say how much some of us appreciate the interest shown in the less popular sources of entertainment in this place?

Mr. Biffen: Thank you very much.

Mr. Dennis Skinner: I wonder whether the Leader of the House can tell us today whether he expects to have the same job when we come back on 21 October? Can he give us——

Mr. Speaker: Order. Is the hon. Gentleman asking for a debate on that? We are concerned here with the business of the House.

Mr. Skinner: I wonder whether the Leader of the House can make a short statement to give us an idea of whether he will be coming back to the House in the same job, or whether the changes will apply only to some of his mates?

Mr. Biffen: I have given no thought to that, but now that the matter has been raised I shall consult the hon. Member for Bow and Poplar (Mr. Mikardo).

Mr. Edward Leigh: Is my right hon. Friend aware that set down on the Order Paper for Friday 25 October is the Second Reading of the Prevention of Political Corruption Bill which I was given leave to introduce on Tuesday? Does my right hon. Friend think that that is surprising, and does he think that the

House will have time to debate the fact that no fewer than 129 hon. Members of the parliamentary Labour party and two hon. Members of the parliamentary Liberal party voted against this worthy and sensible measure and therefore, presumably, showed themselves to be in favour of such politically corrupt acts as the GLC giving £1·5 million for anti-police work? If my right hon. Friend cannot ensure a Second Reading on 25 October, will he ask the Secretary of State for the Environment to put such a measure in the Queen's Speech?

Mr. Biffen: I certainly cannot give the guarantee and undertaking that is sought and I think that it would be presumptuous of me to turn to my right hon. Friend and ask him. However, my hon. Friend is doing a signal public duty in giving the maximum publicity that he has to that issue.

Mr. Laurie Pavitt: The House recently had the opportunity to discuss the nurses' pay award, but is the Leader of the House aware that in the last 10 days a new injustice has emerged which has been met with a wave of indignation throughout the profession? Will he arrange for the Secretary of State for Social Services to make a statement after the recess on the pension problem of a ward sister who was awarded 14 per cent. by the review body and for 1985–86 will receive only 5·6 per cent.? In consequence, when she retires in the next 18 months she will lose £6,000 of pension.

Mr. Biffen: It is the first time that I have heard of this case, and I will certainly draw it to the attention of my right hon. Friend the Secretary of State for Social Services so that he may consider the appropriate action to take.

Mr. John Heddle (Mid-Staffordshire): Does my right hon. Friend accept that the right hon. Member for Chesterfield (Mr. Benn) has gained enormous media coverage through the publication of the Common Ownership of Land Bill? Is he aware that the Public Bill Office has no knowledge of that publication? So that we may know his proposals which cause concern and consternation to my constituents and to many others throughout the country, no doubt, and so that NA e may know the Opposition's position, will my right hon. Friend arrange for an early debate on the matter?

Mr. Biffen: No. We must keep all these matters in very strict perspective. What has happened just shows that the right hon. Member for Chesterfield (Mr. Benn) is adept at dropping bricks without straw.

Mr. Peter Pike: Would the Leader of the House consider making a statement in the week after the summer recess about the issue of reports and written answers, whether or not they are embargoed, to members of the press and the rest of the media before they are made available to Members of the House? The Leader of the House surely recognises that it is wrong for hon. Members to be asked for views on a report which they are unable to secure? Surely the convenience of Members of the House is more important than the convenience of the media?

Mr. Biffen: The hon. Gentleman touches on a point which has exercised the House for decades. If he has evidence to put to me, I shall see what can be done.

Mr. Keith Best (Ynys Môn): Has my right hon. Friend had an opportunity to see the all-party early-day motion


816 standing in my name and that of 50 other hon. Members calling for an early debate on the strategic defence initiative?
[That this House notes the visit of Vice President Bush to Europe to urge European participation in the Strategic Defence Initiative programme; expresses deep concern that there has not been a full debate on the subject in the House; notes that the Strategic Defence lnititative calls into question the current philosophy of deterrence on which North Atlantic Treaty Organisation policy is based; and calls for such a debate in the House as a matter of urgency, since a debate has been held in all other European Parliaments.]
Bearing in mind that similar debates have taken place in other European Parliaments, and bearing in mind the implications for the whole concept of NATO's deterrent policy as well as the importance to British industry, will he ensure that we have a debate at the earliest possible opportunity?

Mr. Biffen: That the topic is important is self-evident, but in the first week after the recess no Government time will be available for such a debate. However, the hon. Gentleman might like to make some of his points at Question Time on Tuesday of the first week when defence is top of the list.

Mr. Jeremy Corbyn: Does not the Leader of the House believe that a debate is urgently needed on the behaviour of British companies and British investors in South Africa, particularly in view of the behaviour of SARMCOL, a subsidiary of the British Tyre and Rubber Company, which for 13 years has refused to recognise the Metal and Allied Workers Union in South Africa?
It is reported that the company pays poverty wages and that there has been a strike there for over three months by 1,000 workers demanding trade union recognition. Does he not agree that the company's behaviour is unfortunately typical of the behaviour of many foreign companies which invest in South Africa, and is yet another reason for having a policy of disinvestment in South Africa?

Mr. Biffen: No provision has been made for a debate on South Africa in the first week after the recess, but there are foreboding signs that that country's problems will intensify rather than ease, and I have an uneasy feeling that it will feature very much in our political discussions as the autumn progresses.

Mr. Francis Pym: Before the hon. Member for Linlithgow (Mr. Dalyell) rose in his place to accuse my right hon. Friend the Prime Minister of a parliamentary sleight of hand in her reply to the hon. Member for Newham, South (Mr. Spearing), I had sought your permission, Mr. Speaker, to raise a point of order in relation to the question put by the hon. Member for Newham, South.
I think that the accusation of parliamentary sleight of hand might more appropriately be put to the hon. Member for. Newham, South. He and many of his hon. Friends are trying to perpetrate the myth that there was something ungenuine about my visit to Washington and New York on 1 and 2 May 1982. I have given the full story to the Select Committee, which knows all the details. I have

described exactly what happened during my visit. What does not seem to be understood, and has not been fully brought out in the Select Committee's conclusions, I think, is that the Peruvian plans which were in a very early, tentative stage on 2 May were developed in the succeeding four or five days after the Belgrano was sunk. I made a statement about those proposals in the House on Friday—I speak from memory—7 May 1982.
When those proposals were turned down by Argentina, it was not the end of our search for a peaceful solution. It was my responsibility at that time, on behalf of Her Majesty's Government, to leave no stone unturned to find a peaceful way in which to resolve the dispute. I remind the House that after the second set of proposals was turned down we drafted a peace initiative to which we would have been prepared to agree. We put that before the United Nations on 17 May. This country and the world were surprised to discover the lengths to which we were prepared to go to reach a peaceful settlement. Many Opposition Members try to allege that our search for a peaceful settlement was not genuine. That is an absolute lie, and it ought to be laid.

Mr. Dalyell: I am not arguing the case but the right hon. Gentleman's remarks proves the need for a debate. The former Foreign Secretary has referred to proposals. Yet the Prime Minister said that no news of the proposals had reached London until three hours after the Belgrano had been sunk. In answer to my right hon. Friend the Member for Llanelli (Mr. Davies), the right hon. Lady said that the first indications of the Peruvian peace proposals had reached London at 11.15 pm on Sunday 2 May. Right or wrong, that is not the former Foreign Secretary's story.

Mr. Speaker: Order. This is going beyond business questions. If this is a matter which may be debated at another time, that is the time at which the hon. Gentleman should make his remarks.

Mr. James Hill: Is my right hon. Friend aware that it is just over a year since legislation was passed creating the six free trading zones, sometimes called free ports, but that little or no progress has been made? Does he agree, therefore, that it would be appropriate to have a debate on the progress of the legislation as soon as we return after the recess?

Mr. Biffen: My hon. Friend made a contribution of considerable force and persuasiveness in the recess Adjournment debate last night. Will not that coast him through until the Queen's Speech?

Mr. Steen: On a point of order, Mr. Speaker. I am told that at about 11 o'clock this morning members of the Press Gallery were told that the Secretary of State for the Environment would make a statement on the Okehampton bypass this afternoon. At 12.45 Downing street indicated that no statement would be made. Can you, Mr. Speaker, tell us whether there will be a statement, or how that arrangement came about?

Mr. Speaker: I have no idea. All I know is that there is to be no statement today.

Mr. Eric S. Heifer: On a point of order, Mr. Speaker. During business questions the hon. Member for Mid-Staffordshire (Mr. Heddle) raised a matter concerning my right hon. Friend the Member for Chesterfield (Mr. Benn). I have been in the House for a


long time. When I first came here it was a matter of courtesy for hon. Members, irrespective of their party, who wished to raise a matter affecting another hon. Member to notify him. I regarded that as civilised behaviour.
Am I to understand that with the arrival of new Members, especially over the past few years, that civilised behaviour has come to an end? I know that the matter does not fall within your prerogative, Mr. Speaker, but perhaps you could ask Members to behave in a civilised way and to adopt the procedure that was used when I first came to the House.

Mr. Speaker: I am glad of the opportunity to confirm that that has been our civilised convention over the years, and I hope that it will continue.

Mr. Frank Dobson: I understand——

Mr. Heddle: rose——

Mr. Skinner: He wants to apologise.

Mr. Dobson: They never apologise.

Mr. Heddle: I fully intended to notify the right hon. Member for Chesterfield (Mr. Benn) but on this occasion I did not. I apologise wholeheartedly to the House for not doing so. I want to make two points——

Mr. Speaker: Order. That might spoil it.

Mr. Dobson: I seek your guidance, Mr. Speaker. Is it possible under the rules of the House for a Minister to make a statement tomorrow in the midst of the Adjournment debates? I understand that the Secretary of State for the Environment intends to make a statement now about the level of the rate support grant and rate capping

of local authorities but that no statement is to be made about the rate capping and expenditure of the Inner London education authority. As it affects tens of thousands of children, and as it is the largest and biggest spending authority, it seems appropriate that a Minister should come to the House to justify the levels being set.

Mr. Nellist: Further to that point of order, Mr. Speaker. You will be aware that the Royal Assent has been given to the Local Government Bill which sets up new means of controlling services in the GLC and the metropolitan areas. Will a further statement be made today or tomorrow on the setting of budgets and expenditure levels for services such as transport and waste disposal, or will that be done during the recess when Labour Members cannot question it?

Mr. Speaker: The hon. Member knows perfectly well that I have no foreknowledge of such matters, any more than any other hon. Member. Statements are announced at noon. That was when I first heard about it.

Mr. Dobson: rose——

Mr. Speaker: Order. It is not a matter for me; it is a matter for the Government. If it is a matter for me, I will hear it, but only if it is a matter for me.

Mr. Dobson: I think that it is a matter for you, Mr. Speaker.
I was asking whether it was possible under the rules of order for a statement to be made tomorrow in the midst of the Adjournment debates. I do not know the answer to that question, but I do not think that it is a matter for Ministers.

Mr. Speaker: It might have been more appropriate if the hon. Gentleman had put that question to the Leader of the House during business questions.

Rate Support Grant (England)

The Secretary of State for the Environment (Mr. Patrick Jenkin): With permission, Mr. Speaker, I shall make a statement about local government finance for 1986–87. It contains my proposals for the rate support grant settlement for England, and my decisions on selective rate limitation.
First, I deal with rate limitation. This year's round has gone well. It has saved ratepayers over £300 million. We have begun to curb the worst overspending of the most profligate authorities. Despite the disgraceful scenes of violence and intimidation in several town halls, there were majorities in every rate-capped council for complying with the law and the will of this House.
I am today laying before the House a report setting out how authorities will be selected for rate limitation next year. For authorities not previously selected, I am proposing the same criteria as I used this year: I am selecting authorities whose budgets this year are more than 20 per cent. above grant-related expenditure and more than 4 per cent. above target. For authorities which were selected this year, I am reselecting them if their budgeted expenditure is more than 20 per cent. above GRE and either more than 1 per cent. above target or more than 30 per cent. over their expenditure in 1981–82.
On these criteria, two authorities, Liverpool and Newcastle, are selected for the first time, and 10 authorities are reselected. They are Basildon, Camden, Greenwich, Hackney, Haringey, Islington, Lambeth, Lewisham, Southwark and Thamesdown. Next year new authorities will come into existence under the Local Government Act 1985 and will be affected by the automatic precept control provided by that Act. Under that provision the Government will set expenditure levels and precept limits for three years. In all, the Government will next year be limiting the rates or precepts of 32 authorities with expenditure totalling some £3·5 billion. That demonstrates the Government's continued determination to rein back the profligacy of the largest overspenders and to prevent extravagance in the initial years of the new authorities.
I am setting expenditure levels for the 12 rate-capped authorities. In most cases there will again be a cash standstill on budgeted total expenditure in the current year. In three 'cases where budgets this year show an exceptionally sharp increase in spending, I am setting lower spending levels.
I am open to representations for redetermination of expenditure levels. Where an existing authority applies mainly because it considers we have made inadequate allowance for functions inherited from the GLC and metropolitan counties, or mainly because special accounting arrangements in its view imply unachievable economies, I shall not use my powers to reduce expenditure levels or impose conditions. My right hon. Friends the Secretaries of State for Education, the Home Department and Transport will be making separate announcements about expenditure levels for ILEA and the new joint authorities.
The success of rate capping in curbing. the worst excesses of the highest spenders means that for the generality of authorities we can now do without targets and penalties next year. That brings me to the rate support

grant settlement as a whole. I am today issuing to local authorities proposals for the main features of the settlement for next year. Copies are in the Library and the Vote Office.
The target system has operated since 1981–82 in order to put pressure on councils to restrain spending. Many of my hon. and right hon. Friends have in the past made the point that the system operates unfairly on low-spending councils, especially those spending below their GRE. Last January in the RSG debate I expressed the hope that for 1986–87 we could do without targets if there was a satisfactory alternative means of restraining spending. I believe that the block grant system can be modified to provide a sufficient deterrent to overspending and accordingly I can tell the House today that the system of targets and penalties will not apply next year.
Instead, expenditure restraint will be achieved by much stronger block grant pressures. I am proposing sharply to increase the rate at which a council's grant will be reduced as its spending rises in relation to GRE. The system will thus put more weight on the comparison of a council's spending with its GRE which is what my right hon. and hon. Friends have sought. Powerful pressures will remain on those councils which spend well above GRE. I am consulting local government on the details.
I am proposing that aggregate Exchequer grant should be the same cash sum as in this year's settlement, £11·8 billion, which is likely to be just under 47 per cent. of relevant expenditure next year. I am proposing to increase the sum provided for local authority current expenditure for 1986–87, as shown in this year's public expenditure White Paper, by £500 million, to £22·250 billion. That is less than local authorities would like but the Audit Commission's reports are showing how councils could save hundreds of millions of pounds without reducing services, simply by getting better value for money.
The RSG settlement that I am proposing will be less complex than in past years; it will be fairer to responsible, low-spending authorities; it will maintain pressure on higher-spending authorities to find savings; and it will place firm control on the most extravagant authorities. If local government responds sensibly, average rate increases next year should be in low single figures.

Dr. John Cunningham: Is the Secretary of State aware—clearly some of his hon. Friends are not—that he has just announced a massive increase in authoritarian central control of local authority expenditure and budgets? He has done so on two counts: first, on the implications of his statements on the Rates Act and, secondly, on his proposals for the rate support grant settlement. Is the right hon. Gentleman also aware that the reality of his statement is that more than 20 million people, under more than 30 authorities, will now have the level of their services and the budgets of their authorities dictated and controlled from Whitehall? That is what the Secretary of State has been telling the House this afternoon.
Why do his right hon. Friends who are responsible for the Inner London education authority, the police service, the fire service and transport, apparently intend to slip out in written answers, either today or tomorrow, their decisions on budgets for those authorities, instead of telling the House of Commons in this or other statements this afternoon? It is a scandalous abuse of Parliament.


Why do transport authorities such as South Yorkshire have to wait to be told by how much the Government intend to force up fares for public transport users in those areas?
Will the Secretary of State explain why the city of Newcastle upon Tyne is to be designated under the Rates Act? That city's expenditure has increased by 91·5 per cent. in real terms since 1978–79. For example, expenditure in Buckinghamshire in the same period increased by more than 112 per cent., in Somerset by more than 103 per cent., in West Sussex by 99 per cent., and in Cornwall by 98 per cent. Is the Secretary of State aware that the net expenditure of the city of Newcastle upon Tyne has fallen in real terms over that period? Is the Secretary of State also aware that if the penalty system that he imposed had not applied there would have been no need for rates increases in that city in the current financial year?
Why should the Secretary of State and his hon. Friends take any pride in increasing the problems facing the people of Liverpool and its city council by further designating that authority under the Rates Act?
The Secretary of State said that he wanted to encourage negotiations in the coming financial year. I welcome at least that part of his statement. So will he give a categorical assurance now, without equivocation, that if authorities approach him on that basis he will not use his severe reserve powers to make the situation worse for them?
On the rate support grant settlement, is the Secretary of State aware that this is the sixth successive year in which the Government have deliberately reduced the rate support grant-in this case, from 48·7 per cent. to just under 47 per cent. of local authority current expenditure? The figure of £11·8 billion that he announced will be a cut in real terms of 7 per cent.. bearing in mind the current rate of inflation, because it is a cash freeze. Hon. Gentlemen need not shake their heads. That is the reality of the announcement.
Is the Secretary of State aware that there will be a shortfall in what councils — including Conservative councils — need to maintain their existing services, of almost £1 billion next year, as a result of this statement?
As Conservative Members appear to be welcoming this statement—based on the use of the GRE in a way that was never intended — will the right hon. Gentleman explain to them what will happen in the Tory borough of Brent, with an expenditure of 18·3 per cent. over GRE? What is to happen in the City of London, with a staggering excess of expenditure over GRE of 252 per cent.? What is to happen in Hammersmith and Fulham, where expenditure over GRE is more than 12 per cent., or Hillingdon, where it is more than 9 per cent., or Harrow or Enfield or Havering or Bexley or even — dare I remind the right hon. Gentleman? — Barnet, where expenditure is also in excess of GRE? What about Conservative Harrogate, Conservative Dartford, Conservative Adur or Conservative Ribble Valley or Hertsmere? The list goes on and on. Having engineered a debacle for the Conservative party in the shire counties this year, the right hon. Gentleman is about to do the same for the district authorities. Or does he, through some political fix or manipulation of figures, intend to bail out the outer London Tory boroughs and others in a political gerrymander?
Is the Secretary of State aware that the £1 billion gap will inevitably increase if a settlement of the teachers

dispute exceeds the 5 per cent. budgeted for, as is inevitable if there is to be a settlement? What impact does the right hon. Gentleman expect that to have on his proposals?
In using GRE in this way, the right hon. Gentleman again casts aside promises made to the House by his predecessors about its use. I refer principally to pledges given to the House by the previous Secretary of State for the Environment, now Secretary of State for Employment. He said of GREAs:
It is not suggested that it prescribes a specific level to which an authority ought to spend…want to make it clear that that was not the purpose."—[Official Report. Standing Committee D; 1 April 1980, c. 941.]
The Secretary of State is totally casting that promise aside. He knows that the Audit Commission and all local authority associations reject this approach to local authority expenditure.
Finally, what now of the Chancellor of the Exchequer's claims that the Government want to increase expenditure on local authority services, as the only way that that can be done is by all authorities—Tory as well as Labour—spending in excess of their GREA?

Mr. Jenkin: I can well understand the wish of the hon. Member for Copeland (Dr. Cunningham) to redeem himself. His questions were certainly numerous and long.
My right hon. Friend the Secretary of State for Education and my right hon. and learned Friend the Home Secretary have today answered written questions setting out the expenditure levels for ILEA and the police and fire authorities. My right hon. Friend the Secretary of State for Transport has said that he does not yet have the information to enable him to set the expenditure levels for the transport joint boards and that he will make anouncements later.
The hon. Gentleman suggested that my statement constitutes an increase in authoritarian control. He is absolutely wrong. The abolition of targets means that we can leave local authorities a greater measure of control over their spending than has existed in the past three or four years.
He asked why we had selected Newcastle for rate capping. Newscastle is overspending its target this year by 7 per cent. and overspending its GRE by 31 per cent. It therefore qualifies under the criteria that I announced. Newcastle's rate is one of the highest in the country—70 per cent. over the past average. It employs one third more staff per thousand than the average of metropolitan districts, and its rates have risen by 66 per cent. in the past four years, compared with the rise in general price index of 23 per cent. I have no doubt that most of the ratepayers in Newcastle will be delighted that I have capped the authority.
The hon. Gentleman mentioned Liverpool. He will be as aware as I am of the refusal of Liverpool city council this year to strike a budget in line with the rate that it has voted. No doubt it has that matter under consideration. It is quite clear that, on the budget that it has published, it is well above the target limit that we have set and well above the GRE and therefore qualifies for ratecapping next year. I am grateful for what the hon. Gentleman said about my assurances about redetermination and I stand by the words of my statement. Doubtless he will wish to read it carefully. In those terms they were unqualified.
The hon. Gentleman suggested that there was a £1 billion shortfall to maintain services. He takes the figure


which the local authorities identified in the expenditure groups of the consultative council. We have increased the amount to be provided in the public expenditure White Paper by £0·5 billion. That represents a significant move towards what the local authorities are requesting, but it would be foolish for the Government to fail to indicate to local authorities that this rate support grant settlement is intended to sustain the pressure for economies and savings.
The hon. Gentleman asked about what would happen, if a teachers' settlement were made, if the teachers' unions and the employers were to agree by October, in the terms of my right hon. Friend's statement, a settlement that would raise the level above that accounted for in this settlement. There would obviously be time to make the necessary adjustments in the final rate support grant settlement for next year.
The hon. Gentleman asked about GREs and quoted my right hon. Friend the Secretary of State for Employment. GREs are not targets. They are not prescriptive and in no sense do we regard them as a substitute or surrogate for targets. That has always been the case. There will be no holdback of grant to the Treasury next year for overspending GRE. We are proposing to use the GRE and the block grant mechanisms to a greater extent than before to exert pressure on high-spending authorities to find savings. We have no intention of forcing authorities to spend at the GRE level. They can spend at other levels. It is up to them and what they can justify to their ratepayers. As for the string of local authorities which the hon. Gentleman mentioned in the course of his question, I can only imagine that he was recounting his journey on Tuesday night. Individual authorities will need to study the consultative document to see how the settlement applies to them.

Mr. Francis Pym: My right hon. Friend will know with what relief his announcement today of the abandonment of targets and penalties for the generality of authorities will be greeted. Hon. Members who have been campaigning for that will wish to thank him for that, and no one more than I. Mind you, Mr. Speaker, when my right hon. Friend makes another benevolent announcement, I hope that he can do so before the local elections rather than after. I should like to put two questions to him. First, will he assure me that he will not invent any device remotely comparable to targets and penalties and that the low-spending authorities can in future receive that fair treatment to which he referred in his statement? Secondly, in considering local government financial reform and local government generally in future, will he reject the false notion that Whitehall knows best and give local electorates the greatest degree of local responsibility and accountability possible?

Mr. Jenkin: I thank my right hon. Friend for his remarks. I can certainly give him the assurance that low-spending authorities, spending below or close to GRE will, on average, stand to gain grant, but of course will continue to face grant pressures against increased spending. On his second point, those two propositions of greater accountability and greater responsibility are the

two principles which underpin the local government finance studies on which my hon. Friends are currently engaged.

Mr. Eric S. Heffer: Is the right hon. Gentleman aware that he is being wholly illogical today? Is he aware that, although he says that he is abolishing penalties, he is reintroducing them by another name? The right hon. Gentleman is suggesting that, with all its problems, Liverpool city council is profligate, yet he went to Liverpool and was shocked at the housing conditions and recognised the terrible housing problems and high levels of unemployment. Is what the Government are doing to Liverpool under the right hon. Gentleman's announcement this afternoon not sheer vindictiveness? If the right hon. Gentleman is serious about negotiations, he should for God's sake open discussions with the councillors to try to reach a sensible settlement instead of pushing them over the brink so that there will be a glorious smash-up for which the right hon. Gentleman, if he continues, will be responsible.

Mr. Jenkin: I utterly refute the hon. Gentleman's allegations. There is no vindictiveness. The council has made its rate and budget decisions this year in full knowledge of the conditions voted and approved by the House as long ago as last January. I assure the hon. Gentleman that Liverpool city council is perfectly capable of managing its affairs if it chooses to do so. I fear that a number of its councillors do not seriously wish to live within the rules that apply to everyone else, but no doubt there is still time.
On Liverpool's housing, the city has 8 per cent. arrears on council house rent income and 10 per cent. of its total housing stock is lying empty. Liverpool is perfectly capable of finding economies in managing its service and it is time that it started to do so.

Mr. Charles Morrison: I congratulate my right hon. Friend on making the block grant system less incomprehensible and for responding so warmly to requests from local authorities and from so many of his right hon. and hon. Friends to abolish targets and penalties. However, will the new arrangements allow low-spending counties complete discretion to spend up to GRE without running into block grant pressures? Will my right hon. Friend also take account of the fact that the savings suggested by the Audit Commissioner, to which he rightly referred, cannot be made equally by all local authorities? Some are more efficient than others and so have not the same scope for savings.

Mr. Jenkin: I entirely accept my hon. Friend's last point.
The revised block grant schedules are spelled out in the consultation document and the House will wish to study the details. Low-spending authorities will start with a higher entitlement to grant than hitherto but the steeper slopes of the block grant schedules will mean that authorities will face grant pressures against increased spending, albeit with greater flexibility than under targets and holdback. Correspondingly, high-spending authorities can achieve considerable savings for their ratepayers if they restrain the growth of their spending and begin to cut back. In that way the block grant system will achieve what was intended when it was introduced in 1980.

Mr. John Cartwright: Will the Secretary of State accept that if GRE is to be used to control local


authority spending it must reflect much more accurately than it does today the social problems of the inner cities? How does the Secretary of State expect local authorities to plan sensibly when every year they have to face a major upheaval in the administration of the block grant system? How does the Secretary of State equate the centralised control of 32 authorities' expenditure with the principles of local government?

Mr. Jenkin: The GREs have been in existence for five years and have been subject to repeated refinement in a process that is carried out jointly by local authority associations in the grants working group of the Consultative Council on Local Government Finance. There is always room for further refinements and improvements, but they are achieved year by year.
Between now and the final announcement of the rate support grant settlement, which I hope will be in December, we shall continue that process so that the GREs can increasingly reflect the reality of local authorities' spending needs.
We are not making this an alternative to targets. The hon. Member for Woolwich (Mr. Cartwright) will see that the revised block grant schedules—the slopes that will result in the reduction of grant as spending rises—do not hinge on the GRE. There is a margin 5 per cent. above and 10 per cent. above, so there is scope for flexibility. I understand the point that the hon. Gentleman is making, but these are matters which can be discussed with the local authority associations.

Sir Dudley Smith: Despite the attacks which have been made on him over the past 18 months or so, my right hon. Friend is to be congratulated on his tough and resolute approach towards the whole vexed question of rates. Will he reiterate the fact that only a minority of individuals in this country pay direct rates? Is he aware that two or three days ago I learned quite unexpectedly that I, as a humble ratepayer in Lambeth, should be paying about £30 a year less than previously, and that—far more important—many hundreds of other people will be paying far less? In those circumstances, my right hon. Friend must be justified in his actions.

Mr. Jenkin: I am grateful for my hon. Friend's words. It is the limited number of those who pay rates which has given rise to the mismatch between those who vote and those who receive services. That, too, is one of the issues at the heart of the local government finance studies in which my hon. Friends are engaged.

Mr. Robert C.Brown: Is the Secretary of State aware that he makes Tammany hall politicians look like amateurs? Is it not monstrous that he should make this rate-capping statement today without giving hon. Members from Newcastle upon Tyne, which it affects, any details or any opportunity to go into the Library to look up the details and then savage him as we would have a right to do? Is it fair for the right hon. Gentleman to prattle on about rate increases of 91 per cent. in Newcastle upon Tyne since 1978–79, when he knows well enough that the reason for 91 per cent. rate increases is the savage reduction in the rate support grant that he has inflicted on Newcastle upon Tyne and on every other major city?
The Secretary of State went on to berate Newcastle for being 7 per cent. above target, spending 31 per cent. More

than the GRE. He knows quite well that the GRE for Newcastle is much less than the target. This year, Newcastle city council has very responsibly set a standstill budget of £146 million. The right hon. Gentleman said nothing about the price that will have to be paid for the abolition of Tyne and Wear county council, although I concede that he said he was prepared to have discussions. That should have been in his statement, and we should have been allowed time to consider it and debate the issue.

Mr. Jenkin: The hon. Gentleman may have lost sight of the fact that this is a provisional announcement, in accordance with the pattern followed by Governments in recent years. The final rate support grant settlement will be announced in December and will be debated soon after Christmas. I can promise the hon. Gentleman — no, perhaps I cannot promise the hon. Gentleman. He will have plenty of opportunities to savage whoever will be standing at this Dispatch Box then.

Mr. Alex Carlile: The right hon. Gentleman is to be reshuffled.

Mr. John Cunningham: It will be the right hon. Gentleman.

Mr. Jenkin: I am grateful for the hon. Gentleman's assurance. However, I must point out that Newcastle has been a high-spending authority for years. Its rate has been one of the highest, if not the highest, in the country. Its expenditure per head last year was nearly a quarter as high again as the average for metropolitan district councils. The hon. Member for Newcastle upon Tyne, North (Mr. Brown) will be well aware of the outcry which greeted this year's rate increase, which I believe was about 23 per cent. I think that there would have been great disappointment in Newcastle if I had not included its name among those to be rate-capped next year.

Mr. Robert N. Wareing: Does the right hon. Gentleman not agree that through his statement, far from reducing penalties and lifting the burden from local authorities, he is ensuring that a local authority does not have to reach a target to be penalised but must merely exceed its GRE?
Does the right hon. Gentleman not agree that his remarks today — during what is, apparently, his swansong—on the subject of Liverpool will be regarded there as a gross betrayal of the citizens of that city after the visits paid to it last year by him and his hon. Friend the Minister for Housing and Construction? On that visit, he promised to devote his best endeavours to assisting the city with its serious housing problems. The only way in which he can now show that he is not being vindictive is by agreeing to meet the democratically elected councillors of Liverpool.

Mr. Jenkin: As the hon. Gentleman knows, the chief executive of the city council recently wrote to my Department setting out two or three matters about which he thought it would be useful to have a meeting.
As I explained to the hon. Gentleman and his hon. Friends when they met me to discuss the matter, in view of the situation in Liverpool there seems to be no purpose in our meeting now to discuss those matters.
The trouble with Liverpool city council is that its demands are always so extravagant and unreasonable that any discussion of them is bound to end in tears. There is, therefore, no purpose in embarking on that course

Mr. Malcolm Thornton: I join many of my right hon. and hon. Friends in saying how pleased my authority of Sefton will be with the Secretary of State's announcement that targets and penalties are to be abandoned.
Will my right hon. Friend confirm that, contrary to what the hon. Member for Copeland (Dr. Cunninghan) said about him adding to the problems of Liverpool, since he took office in Marsham street in 1983 he has devoted more of his time and made more offers of co-operation to Liverpool council in an attempt to sort out its problems than to any other council in the country?
Will he also agree that the refusal over many months of the leaders of Liverpool city council to co-operate with his Department is a major contributing factor in the problems that Liverpool faces in determining its rate and budget?

Mr. Jenkin: I agree with every word of what my hon. Friend said. I add only that last year, at the end of lengthy discussions with Liverpool, we agreed to an addition to its urban programme of £2·5 million if it could identify suitable projects. Now, over a year later, the council has put forward projects amounting to only £1·7 million; and as I told the hon. Members for Liverpool constituencies who came to see me, the balance remains on offer and the undertaking that I gave will be honoured. If the council wants the benefits of that money, it should put in the necessary applications.

Sir Anthony Grant: Is my right hon. Friend aware that I warmly welcome the fact that he has at last recognised the unfair way in which the target system bore upon responsible authorities such as Cambridgeshire?
To clarify the point made by my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym), will my right hon. Friend confirm that if, in future, the authorities in Cambridgeshire pursue the same financial disciplines and prudent policies of their predecessors, the ratepayers will benefit from his announcement today?

Mr. Jenkin: That is quite right. Conversely, if those authorities now choose to raise their spending sharply they will find that that will impose considerable penalties on their ratepayers.

Mr. Simon Hughes: Will the Secretary of State accept——

Mr. Jenkin: If I may correct myself, I did not mean penalties in the sense of the targets, but that the ratepayers will find themselves paying higher rates.

Mr. Simon Hughes: Will the Secretary of State accept that, while we welcome the abolition of part of the monopoly of control exercised through the target and penalties system, we do not believe that people will be deluded into thinking that the settlement as a whole is advantageous?
First, the Secretary of State should tell the House that there will be a cut in central Government money for local authority services, as that is what his announcement implies. Secondly, it would be helpful if he would state the three local authorities that will have lower spending limits, which he mentioned in his statement.
The right hon. Gentleman may not want to be wise after the event, which is the lot of all his right hon. and hon. Friends who pleaded with him to benefit the shires. On

behalf of all the alliance authorities which now control those shires, I am happy to accept that benefit. However, does he now need to be wise before the event in the context of the inner city? What is apparent is that the inner city authorities, with the transitional scheme, are likely to be particularly hard hit in future. There will have to be changes if they are not to be penalised unnecessarily—Tory, Labour or alliance—in the coming year, and if the system is to be fair Where the needs are clearly still greatest.

Mr. Jenkin: I should like to compare the Exchequer grant figure in my statement with what will now be paid to local authorities following the first interim supplementary report for this year. There is an increase in the percentage next year. The withholding through the penalty system of over £500 million of grant under the target and penalty system has reduced this figure to below 47 per cent. this year, and it will be above that next year. Because there will be no holdback of penalty that will go to the Treasury, any grant which is withdrawn from an authority which increases expenditure will be redistributed among the remainder of authorities, and particularly benefit low-spending authorities who have budgeted responsibly.
On the question of the consequences of abolition, I assure the hon. Gentleman that they have been taken into account in setting the expenditure levels of successor authorities which are rate-capped.

Several Hon. Members: rose ——

Mr. Speaker: Order. The Secretary of State said that there would be a debate later. I appeal to hon. Members to ask briefer questions and not to give a forecast of the speech that they may make later.

Viscount Cranborne: Will my right hon. Friend acknowledge the history of financial rectitude by the county of Dorset over the past few years in contrast to other authorities, not all of them Opposition-controlled? May we look forward to an appropriate reward in years to come?

Mr. Jenkin: Dorset will find that it has its rewards in this rate support grant settlement.

Mr. Laurie Pavitt: Brent is very temporarily Conservative-controlled. Will the right hon. Gentleman confirm that it will not be rate-capped next year? His statement means that he—if he is still there—will have the same controls as he has at the moment. Has he had the opportunity of discussing with his hon. Friend the Minister for Housing and Construction the three-hour visit, for which I was most grateful, that he made to look at the squalid plight of 1,100 homeless families in sleazy hotels? The several clergymen present made some suggestions to which his hon. Friend listened with great courtesy. Does this statement mean that there will be no hope for the homeless families in Brent?

Mr. Jenkin: On the first part of the hon. Gentleman's question, Brent is not being selected for next year because, as a result of the selection and rate capping this year, it has succeeded in restraining its expenditure to the point where it is below the criterion of 20 per cent. above GRE. It has therefore properly — I am glad of this — removed itself from rate capping.
I should like to discuss with my hon. Friend the Member for Housing and Construction what the hon. Gentleman said in the second part of his question.

Mr. Wilkinson: I warmly welcome my right hon. Friend's statement. The target and penalty system which my hon. Friends the Members for Uxbridge (Mr. Shersby) and for Hayes and Harlington (Mr. Dicks) and I campaigned so vigorously against is to be withdrawn. Will he reassure us that our borough of Hillingdon, which had the highest percentage increase in rates in London, and was not rate-capped, will he compensated in full by central Government for those extra functions which it will have to inherit following the abolition of the GLC?

Mr. Jenkin: I understand the anxieties that many successful authorities are feeling as these matters have not been finalised. The intention is that the GREs of the abolished authorities should he distributed among the successor authorities, so that they have an adequate base from which to supply the appropriate level of services. It will be up to the successor authorities—such as my hon. Friend's London borough of Hillingdon—to decide how many extra staff, and so on, they will need to fulfil those functions. I have been greatly reassured by the number of authorities which believe that they can take on the GLC's functions in transport and planning and so on, with very few additional staff. That will redound to the benefit of their ratepayers.

Mr. Brian Sedgemore: How can the Secretary of State justify what will amount to harsh and cruel cuts in the services for and living standards of the poorest people in the poorest borough in the country, Hackney, when across the road in the City of London rich, powerful and fraudulent people at a bank are being bailed out with public money to the tune of £248 million? Is there one law for the rich and one for the poor?

Mr. Jenkin: Hackney's rates, despite rate capping this year, are 124 per cent. above the average for inner London authorities. If the hon. Gentleman cannot recognise the damage that that does to Hackney's economy, he is past praying for.

Mr. George Walden: In his announcement of the abolition of targets and penalties, for which we are duly grateful, my right hon. Friend stated that they operated unfairly. Is he aware that in Buckinghamshire that unfairness has been compounded by the population problem to the point where a cut of 12·5 per cent. in capitation for schools has been precipitately made? Will my right hon. Friend look for ways to alleviate that problem before next April?

Mr. Jenkin: I am well aware of the problem, and I know that the Buckinghamshire authority will be helped by the abolition of targets. But in respect of population increase, I must remind the House that, just as there is a lag of a year or more in taking account of the most up-to-date population figures, equally there is a time lag in taking account of the latest increase in rateable value as a result of that expansion. Both those factors move in parallel. It is not right merely to look at one side of the balance sheet; both sides should be considered together. Nevertheless, I do not believe that serious harm is done to places with substantially increasing populations.

Mr. Greville Janner: Will the right hon. Gentleman inform rate-capped authorities such as the city of Leicester, which have been forced to cut into their already inadequate reserves, whether he proposes to

provide any compensation in 1986–87 for the use of those reserves in 1985–86? Bearing in mind that the cities such as Leicester which are suffering hardship are precisely those on which there is the greates pressure to spend, will he show that the Government have some understanding of the problems that they face in trying to give service to disadvantaged people in the face of the Government's awful policy?

Mr. Jenkin: Considering that I have decided not to rate-cap Leicester next year because, according to the latest estimate, it has brought its expenditure below the level that would come within the criteria, I find the hon. and learned Gentleman's remarks astonishing. If Leicester will submit a proper return, signed by a proper officer, with an accurate estimate of what it will spend this year, perhaps the city and the Department of the Environment will get on a little better.

Mr. Peter Bruinvels: Is my right hon. Friend aware that I agree with him that Leicester should not be rate-capped again this year? The success of the Government's policy is shown by the fact that the city has kept within its budget for the coming year; it is to be congratulated on that. However, will my right hon. Friend take careful note of whether Leicester city council misbehaves in any way, and monitor the authority throughout the year? The council is scaremongering, and alleging that it will not have enough money at the end of the year.

Mr. Jenkin: Leicester is seeking to pretend that it will spend this year something over £30 million. Despite all the efforts of my very able civil servants, we cannot conceive how it will have the resources to spend more than about £25 million. If the council ends up by spending £25 million, it will bring itself below the level of the criteria for rate capping. That shows that the system is working.

Mr. Nicholas Brown: Why has the Secretary of State singled out for punishment provincial capitals such as Newcastle and Liverpool which are areas of high unemployment and social deprivation? The Minister seemed to think that his announcement would be popular in Newcastle, but is he aware that the size of the Conservative group on Newcastle city council has shrunk to just over half what it was when he first became Secretary of State for the Environment? Is he further aware that among those who will undoubtedly become unemployed as a result of his announcement will be his hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Merchant)?

Mr. Jenkin: I had gained the impression from my recent visits that if Newcastle had not been included in the list of rate-capped authorities next year, that Conservative group might have found itself even smaller after next year's elections. As it is, I believe that it now has something to sell.

Mr. Derek Spencer: Does my right hon. Friend not agree that, as is so often the case, Leicester can teach the rest of the country a lesson? The lesson is that rate capping need last for 12 months only and can introduce financial sanity where there was madness. That quite destroys the myth that selection has been on the basis of political vindictiveness.

Mr. Jenkin: I am grateful to my hon. and learned Friend for that comment. We have attempted to adopt


objective criteria for the determination of the selection of authorities and expenditure levels, and that is right. In regard to selection, we have obtained stability by applying the same criteria for new authorities as we had last year.

Mr. Terry Fields: Having refused to meet members of Liverpool city council, and obviously being convinced that his policies are justifiable and defensible, will the Secretary of State join me later and speak to the wives and families of Liverpool city councillors and seek to convince them of the legitimacy of his ideas? Perhaps he is prepared to pre-empt the Prime Minister's axe by committing political suicide because when the people of Liverpool hear what he intends to do to them next year there will be a movement that will be echoed throughout the British Isles. I warn the Secretary of State on behalf of the people of Liverpool that they will be dancing on his political grave if these policies go through.

Mr. Jenkin: The House will recognise some of the pressures that I come under from Liverpool city council.

Mr. Roger Freeman: Is my right hon. Friend aware that prudent spending councils in the shires, such as that in my constituency of Kettering, will welcome his statement about the abolition of targets? However, current and capital expenditure are closely linked, for both national and local government, and last year he made a statement about voluntary restraint on capital expenditure as part of a similar statement. Will my right hon. Friend assure the House that there is no prospect of calling for voluntary restraint on capital expenditure and that he will make a statement to the House as soon as possible on reorganising and recasting the system of capital expenditure allocations?

Mr. Jenkin: I am sure that my hon. Friend will have noted the answer that I gave to my hon. Friend the Member for Skipton and Ripon (Mr. Watson) in which I said that it was not the Government's intention at present to contemplate making a statement this year about this year's potential capital overspend, despite the fact that it might be quite considerable and any overspend will be a charge against the contingency reserve. In regard to the reform of the capital control system, we are well advanced in discussions with local authority associations. It is not a straightforward matter, but I hope that we shall be able to reach a conclusion in due course on a better system than that which we have at present.

Mr. Tony Banks: The House realises that the Secretary of State is hoping that the rate support grant settlement will save him from the Prime Minister's award of a second ball bearing plant at Omsk. However, before he bedazzles his hon. Friends, will he tell the House how many authorities are already spending over GREA and, therefore, how many Tory authorities will come into penalty during next year? Will he also tell the House whether he intends ever to do something about the low level of services provided by many Tory authorities because that is the other side of the coin?

Mr. Jenkin: The hon. Gentleman has not fully understood the system and I do not blame him for that because it is complex. GREA is not a substitute target so that those which go over GREA suffer penalties while

those which are below it do not. We are seeking to increase the slope of the withdrawal of rate support grant as expenditure increases. Those authorities below GREA will start with a higher level of grant, but, as I said to my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym), if they increase their expenditure sharply they will lose grant and their ratepayers will have to pay most of the excess in rates. Those whose spending is well above the level of the GREA will find that that presses more sharply. The system operates by reference to the GREAs and not by targets—that was the complaint about past expenditure patterns—and most authorities will find that it is fairer and more flexible.

Dr. Keith Hampson: Is my right hon. Friend aware that in 1981, many of us keenly supported legislation designed to abolish the old rate support grant system which automatically paid more Government grant to each local authority, such as Newcastle and other profligate authorities, which spent more? It is most welcome to have returned to the original ideas for which we legislated in 1981. It will give more stability to local treasurers and benefit the more economical councils. The essence of abolishing targets and holdback means that next year more money will be distributed among councils rather than going to the Treasury. If councils wish to spend more they will lose grant progressively. There will be more money available under this system than there is for the current rate support grant in this financial year.

Mr. Jenkin: My hon. Friend is right. If account is taken of the holdback on the first supplementary rate support grant report, which was debated last week, the percentage of grant next year will be higher than the percentage this year. The country was sick and tired of a system which rewarded extravagant authorities for their extravagance and penalised careful authorities for their care. The system of block grant taper has put that right.

Mr. Eddie Loyden: When will the Secretary of State realise that quoting arbitrary figures does not resolve the problems in many of the larger industrial conurbations? Is not it time that the Government recognised, as my hon. Friend the Member for Newcastle upon Tyne, North (Mr. Brown) said, that areas such as Liverpool and Newcastle suffer serious deprivation? The Government should turn to the needs of Liverpool, Newcastle and other places rather than bandy about arbitrary figures that are meaningless against the background of cities which are suffering as a consequence of the Government's policies.

Mr. Jenkin: The hon. Gentleman fails to recognise that the calculation of GREs takes account of the circumstances of the inner cities. Liverpool's GRE at £432 a head is the second highest of all the metropolitan areas. It is far higher than the average for metropolitan districts. Let us take some London figures. Camden has a GRE of £381 a head, Islington of £396 a head and Southwark £373 a head. The average for outer London boroughs on services excluding education—the figures must be on a comparable basis—is only £156 a head. The difference between those figures represents the differences in need, as measured by the GRE system.

Mr. Tim Smith: At what point will the block grant pressures, to which my right hon. Friend


referred, come to bear on an authority? Will it be before or after it passes its GRE? Will there be any loss of grant by a county such as Buckinghamshire which spends around GRE?

Mr. Jenkin: An authority which spends below GRE will start with an increase in its grant. As its expenditure increases, so will the local contribution, and the grant will be reduced. If an authority spends around GRE it will receive the appropriate level of grant for doing so but if its spending rises above that level on a progressively steepening schedule it will find that its grant is withdrawn and more of its extra expenditure will have to be met by its ratepayers. Unlike the system of target and penalties, as an authority decides to spend up and so loses grant, that will be to the benefit of other authorities which have kept their spending down.

Ms. Harriet Harman: Does not the Secretary of State realise that the reason that Southwark is what he describes as a high-spending council is that it is struggling desperately to meet the needs of, and provide services for, the people of Southwark? Perhaps he ought to refer to the league table of home help provision, as his Government say that they are concerned about care in the community. The councils that he calls irresponsible are those that are actually meeting the DHSS guidelines for the number of home helps per 1,000 elderly in the community —I refer to Hackney, Lambeth, Lewisham, Haringey, Camden, Greenwich, Islington and Southwark — yet those are the councils that he is penalising. The councils who fail to meet the Government's guidelines for provision for the elderly, leaving them in the lurch, are Kingston, Sutton, Croydon, Essex, Bromley, Kensington and Chelsea, and Kingston is providing less than a quarter of the home helps required by DHSS guidelines. Is it not the Tory councils, the shameful low spenders, who are the irresponsible ones, while the Labour councils, the high spenders, are the responsible councils because they try to meet the needs of their communities?

Mr. Jenkin: Southwark's rates have risen 71 per cent. above the class average. Southwark's expenditure per head is 24 per cent. higher than the class average and its GRE recognises the difficulties to which the hon. Lady referred because it is two and a half times the size of the average outer London GRE covering the same services—that is to say, excluding education for outer London.
Southwark has spent freely and rated high, and driven many businesses away from the borough, as the many letters I have had from Southwark business men establish. The result is that unemployment is high in Southwark and no doubt many of the problems that the hon. Lady mentioned are a consequence of it. If Southwark council can be persuaded to bring its expenditure under control by making sensible economies and bringing down its rates, perhaps it can have some of the prosperity of some of the other authorities that she mentioned.

Mr. Henry Bellingham: When my right hon. Friend came to Norfolk earlier this year he was given a hard time due to intense ill-feeling in Norfolk because the county council's target for this financial year was so many million pounds below its GRE, which was having a severe effect on essential services. Today's announcement about the abolition of penalties and targets will therefore come as an enormous relief to the people of Norfolk.
Will my right hon. Friend confirm that Norfolk will now control its own destiny and will have the finance for essential services?

Mr. Jenkin: How much finance Norfolk county council has will depend on its decisions. I am grateful to my hon. Friend for what he said. Norfolk has been a sensible, moderate, low-spending authority—the type of authority that should benefit from my announcement today.

Mr. Guy Barnett: Will the right hon. Gentleman take it from me that his GRE system simply does not take proper account of multiple urban deprivation — the reason why there are high spenders in inner London—or of unemployment and the problems arising from it for local authorities? It also does not take account, because figures are out of date, of the rising population in my borough. Given that he places such emphasis on GREs, using them both as a penalty and to decide on those boroughs that need to be capped, he really ought to revise the whole system in order to bring some element of justice to it.

Mr. Jenkin: We do not expect the rate support grant system to recognise all the levels of deprivation in inner city areas, which is why the Government are spending well over £300 million a year on the urban programme. Various forms of urban programme support go to many of the authorities that complained.
The receipt of urban programme support should in no way relieve an authority of the obligation to run its own services efficiently and economically. Many inner city councils fail competely to do that because — in the language that they always use—it is always "jobs before services". They look after the trade unions and their employees and hang the ratepayers.

Mr. Piers Merchant: Does my right hon. Friend agree that despite the insinuations of the hon. Members for Newcastle upon Tyne, North (Mr. Brown) and Newcastle upon Tyne, East (Mr. Brown), his announcement will be widely welcomed and warmly applauded in Newcastle where the district rates are the highest in the country, with an increase of 23 per cent. this year and spending 30 per cent. above GRE? Does he agree that Newcastle has deliberately and knowingly priced itself into rate capping by irresponsible overspending? Nevertheless, will my right hon. Friend afford every opportunity to encourage city councillors to meet him to discuss the announcement? However at the same time, my right hon. Friend should bear in mind the heavy weight of representations made to him by ratepayers in the city about the high rates.

Mr. Jenkin: As a rate-limited authority, Newcastle city council can, under the Rates Act, apply to me for a redetermination. That will give members of the council the opportunity to meet representatives of the Department of the Environment to discuss Newcastle's financial problems.

Mr. Jeremy Corbyn: Will the right hon. Gentleman explain why the document that he produces year after year does nothing more than take increasing sums of money from inner urban areas which suffer from multiple deprivation? Does he agree that the document fails to take account of the needs of the people in the borough of Islington and instead seeks to make


enormous cuts in council services with a consequent loss of jobs? Will he say how much money he proposes to take this year from the 10 poorest inner urban areas? The document is a measure of vindictiveness against the poorest people and it tries to force local authorities to be in conflict with the right hon. Gentleman. He began the conflict, but he will suffer the political demise as a result.

Mr. Jenkin: I remind the hon. Gentleman that Islington's GRE per head is £396, 2·5 times the size of the comparable GRE per head for the average outer London boroughs. Those figures demonstrate clearly that the system takes account of the social needs of inner city authorities. If Islington had been able to maintain the 3 per cent. downward trend in the number of employees instead of increasing its full-time employees by 19 per cent. since 1981, perhaps Islington's rates would not be so high as to drive businesses out of the borough. Unemployment would have been lower. There would have been more rate income and the people of Islington would have been better off. It passes my understanding why Left-wing councils cannot understand that simple arithmetic.

Mr. Edward Leigh: Is my right hon. Friend aware that the whole county of Lincoln will welcome the announcement, for which I campaigned, first, because a decreasing amount of precious resources will be drained away into the higher-spending authorities. Secondly, while Lincolnshire has cut £5 million in waste and consistently spends below GRE, it has been forced to spend above target because of the sparsity factor which entails almost £4 million for school transport costs alone.
Can my right hon. Friend now offer Lincolnshire more hope on the sparsity factor and on capital balances? May we say that we are now in the business of rewarding the friends of low spending in the shires instead of sustaining the apologists for high waste in the cities?

Mr. Jenkin: I am grateful for my hon. Friend's comments. I acknowledge the part that he and others played in campaigning for the end of targets. The target system was intended to rein back the rapidly increasing local authority expenditure overall. That has succeeded. The average per year before 1980 was more than 3 per cent. in real terms while this year's spending has been static. That is a considerable achievement by local authorities. It would not have been achieved without the target system. Now we can move to a system which, I hope, will be fairer. GREs and sparsity factors will be discussed between my Department and local authority associations between now and December.

Mr. Bill Michie: However the right hon. Gentleman dresses it up, penalties are penalties. If the slope is increased that will obviously affect local authorities, especially the caring Labour ones. One of the problems that the Secretary of State seems to miss continually is that of the extra pressures on inner cities.
Will the Secretary of State let us know as soon as possible when he has finally decided on GREs and the effects of the transfer of services? Does he agree that those measures are likely to cause a 300 per cent. rise in bus fares in Sheffield and south Yorkshire? If not, will he state categorically that that will not happen?

Mr. Jenkin: I hope that the hon. Gentleman recognises that the Sheffield's budget this year has taken its spending below the figure of 20 per cent. over GRE and it, too, has taken itself out of rate capping.
We wish to ensure that successor authorities know the financial consequences of abolition as soon as possible, but that task has not been made easier by authorities such as the hon. Gentleman's which, until yesterday, refused point blank to take part in discussions. I very much welcome the decision of the national executive committee of the Labour party yesterday to end that non-compliance.
The hon. Gentleman's second point, is a matter for my right hon. Friend the Secretary of State for Transport. He will no doubt clarify the matter when he makes his announcement about the transport joint boards' expenditure levels later in the year.

Mr. John Fraser: Does the Secretary of State agree that in boroughs such as Lambeth the reduction in the level of rate support grant is only a shift in the burden of taxation from those most able to bear it to those least able to do so? Does he agree, too, that the rate capping of Lambeth for a second time cuts services for those least able to bear them? Next year, all the London boroughs will be up for election, so why does not the Secretary of State leave the choice on such matters in Lambeth and elsewhere to the electorate? The Secretary of State has already confessed that he has become redundant and is rabid about the opposition of Labour authorities.

Mr. Jenkin: The hon. Gentleman should hang, his head in shame at the way in which Lambeth council behaved in the first three months of this financial year. The way in which Councillor Ted Knight led the mob to town halls of other London boroughs in an attempt to intimidate them not to make their rates was disgraceful. He got his comeuppance when his council decided, at long last, to make a rate. The auditors' procedures have now started and are, of course, outside my control.
I cannot possibly agree with the hon. Gentleman. Relatively few high-spending authorities have shown themselves impervious to ratepayers' pressure and have placed intolerable burdens on them. That is why the Rates Act was passed; rate capping has saved ratepayers in the capital authorities over £300 million.

Mr. Tony Lloyd: If the high rates are responsible for job losses, why has the Conservative-controlled borough of Trafford, which has adhered slavishly to Government policy, lost far more jobs per head than the city of Manchester? Will the Secretary of State also say whether he feels more sympathy for my constituents in Trafford who will be deprived of services because the council wants to follow a Government diktat; or for my constituents in the city of Manchester who will be deprived of those same services because the Government make the city council underspend?

Mr. Jenkin: The city of Manchester has the highest GRE per head of all the metropolitan districts, and so receives substantial help from the Government. No one has ever questioned that Trafford has suffered seriously in the recession, but its council recognised that its problems would have been much worse if it had increased its rates sharply. It kept its expenditure firmly under control and will benefit from the new arrangements next year.

Mr. Pike: Will the Secretary of State not recognise that most people in the country will regard the package that he announced this afternoon as a con trick? It may benefit some local authorities but it will switch the attack quite viciously to others. For instance, Lancashire county council will benefit as a result because it will be able to spend up to its GRE without being heavily penalised. It will spend that money because it needs to do so, and there will be no rate reduction for the county. By comparison, Burnley—because its target is currently 50 per cent. above GRE—will lose cash, and that is a penalty. Can the Minister not accept that if he wishes to make the GRE the main plank of his RSG settlement he needs to get the basic matter right and base it on the needs of the local authority and not on the present system, which no one can understand, and which his Department cannot explain?

Mr. Jenkin: The GRE, as the hon. Gentleman will know if he studies the Blue Book which we publish each year, is a sophisticated way of seeking to represent precisely what he said about the needs of individual authorities.
Perhaps I should say, lest the hon. Gentleman has been misled, that in order to avoid excessive grant gains or losses as a result of the changes embodied in my announcement today, for all authorities there will be safety nets on losses and limits on grant gains. That will bring a measure of stability to the system, which I know many local authorities are anxious to see.

Dr. Cunningham: Will the Secretary of State confirm that the consultation paper, which he has published today in conjunction with this statement, says that he proposes
the steepening of the schedule at 10 per cent. above GRE as under the existing arrangements…these changes would significantly increase the marginal cost to authorities of additional spending"?
Does that not mean, in plain English, that authorities spending in excess of 10 per cent. over their GRE will suffer a loss of grant through a penalty?

Mr. Jenkin: The answer is that certainly they find that as they increase their spending above GRE, above 5 per cent., above 10 per cent., a higher and higher proportion of that additional spending will have to be met by ratepayers. With respect, as my hon. Friend the Member for Leeds, North-West (Mr. Hampson) said, that is exactly what he was hoping the system would do. He recognises that this system will not let high-spending authorities off the hook. It contains a strong downward pressure for those authorities to economise and provide savings along the lines adumbrated by the Audit Commission.
I hope that the hon. Gentleman will support those authorities which seek to use the Audit Commission's report in order to deliver their services more economically.

Dr. Cunningham: On a point of order, Mr. Speaker. I raise a point of order because it was in the hearing of the whole House that the Secretary of State, in response to a question from one of his hon. Friends, used the word "penalty" in response to a question about his proposals. The Secretary of State described that as a slip of the tongue. May I have your assurance, Mr. Speaker, that the exact words used by the Secretary of State in those exchanges will be recorded in Hansard?

Mr. Speaker: Certainly. Hansard is a verbatim report.

Mr. Heffer: On a point of order, Mr. Speaker. Because of the statement that we have heard this afternoon, and because of the situation in Liverpool, I should like to move the Adjournment of the House——

Mr. Speaker: Order. Is the hon. Gentleman seeking to make an application under Standing Order No. 10?

Mr. Heffer: Yes.

Mr. Speaker: The hon. Gentleman will have to do that after the next statement, please.

Rate Support Grant (Wales)

The Secretary of State for Wales (Mr. Nicholas Edwards): With permission, Mr. Speaker, I wish to make a statement about my proposals for the 1986–87 rate support grant settlement for Wales.
Local councils have begun to plan their budgets for next year. To help them I am today circulating my proposals for the key elements of the 1986–87 settlement. Copies of the explanatory material sent to Welsh councils have been placed in the Library and in the Vote Office.
Before outlining my proposals it is important briefly to summarise the record of Welsh authorities in recent years, as this has had a major bearing on my strategy for 1986–87.
Local government spending on services in the 1960s and 1970s grew by 3 per cent. or more a year in real terms, absorbing an ever-increasing share of the national product. I am pleased to say that in Wales this damaging trend has been halted. Spending in the present year is only fractionally higher, in cost terms, than in 1979. Since 1979 the average annual increase in rates has been 30 per cent. lower than when Labour was last in office. The total rise since 1979 has been seven percentage points below the change in the RPI.
Success in reining back current spending has also enabled me to release a significant amount of resources for capital investment. Gross capital spending in Wales has grown twice as fast as inflation since 1981–82. In the RSG debate last January I told the House that I would consider whether to abandon targets for 1986–87. I have now decided to do so, but at the same time to toughen the alternative means of containing spending by raising the rate at which local authorities will lose grant as their spending rises relative to GRE. I believe that this will restrain spending in a way which is as effective as, but fairer than, targets. The local authority associations, with whom I have discussd the issue in detail, are prepared to accept this as a reasonable price to pay for moving away from selective controls and for restoring a greater measure of local accountability. The precise system of controls proposed for 1986–87 has, in fact, been strongly influenced by the views of the associations, and the Welsh Counties Committee in particular.
Under the new arrangements, the great majority of councils will now face a cash reduction in grant if they opt for an above average increase in spending. An important feature of the new scheme is that it also dramatically increases the rating benefits for below average growth in spending, and I am sure that many councils will come to recognise this in the coming months.
In order to moderate some of the large poundage increases which would otherwise have come about, I have taken up the Welsh counties' idea of limiting the aggregate of GREs to a total 10 per cent. below the actual level of provision for the year.
I deal now with the level of resources. Following discussions with the associations, I propose to add £15 million to the provision for current expenditure shown in last year's public expenditure White Paper. The adjusted total proposed is £1,368 million. If councils succeed in holding their spending to that figure, by the end of this Parliament they will have met my objective of returning spending — in cost terms — to the level recorded in 1979–80.
Taking into account the other elements of spending, total relevant expenditure for RSG purposes is provisionally estimated to be £1,598 million. This is £76 million, or 5 per cent., more than the amount that authorities have budgeted to spend in the present year.
In arriving at the relevant expenditure total I have taken account of the pressure on the resources for advanced further education. The committee of the Wales Advisory Body has told me that an early decision on the size of the AFE pool would greatly assist its annual planning exercise for this sector. I have therefore proposed to the Welsh Counties Committee that the pool should total £31 million in 1986–87, an increase of £2·5 million, or 8·8 per cent., over the figure for 1985–86.
Aggregate grant in support of relevant expenditure will be £1,067 million, giving a grant percentage of 66·8 per cent., which is virtually the same figure as for the present year. In cash terms, grant is £54 million, or 5·3 per cent., higher than the level in the supplementary report for 1985–86.
The final ingredient of my proposed package is an £11 million addition to the existing provision for local authority capital investment. This enhancement of 1986–87 resources is linked directly to Welsh authorities' efforts to contain their current expenditure in 1985–86.
When all the elements of the package are taken together, the arithmetic shows that if councils spend in line with the provision which I have set, rate rises next year should not, on average, exceed the going rate of inflation. Indeed, a good number of councils will be able to cut the rate burden while still budgeting for a moderate cash increase in spending.
The tough but more straightforward and less interventionist arrangements which I intend to introduce next year should provide authorities with sufficient incentive to budget moderately, and a firmer basis on which to plan their spending effectively. Targets and holdback have been extremely successful in Wales, and I believe that the new arrangements will be equally effective.
I commend my proposals for the 1986–87 settlement to the House.

Mr. Barry Jones: The right hon. Gentleman beats a partial retreat. The House of Commons research staff have calculated that between 1978–79 and 1985–86 the overall cut in grant. in real terms, is over 13 per cent.
The new regime poses new problems for the district councils. Does the right hon. Gentleman agree that the Welsh districts have performed admirably and have been co-operative? Is he aware that in spite of that they now find themselves faced with an equally penal grants system to replace the system of targets and penalties? The new system will penalise up to 31 of the 37 district authorities, as opposed to a mere five in 1985–86.
Can the right hon. Gentleman confirm that the vital element of 90 per cent. GRE, the safety net and gain cap limiters will be retained in future years, as requested by the Welsh district councils when they accepted the change?
The Secretary of State knows that there is a 5 per cent. increase in the counties' relevant expenditure overall. This includes only 4·5 per cent. current expenditure over and above the revised figures for the current year. Bearing in mind the teachers, police and fire service pay awards, is


that adequate? The county authorities are justifiably apprehensive. Is the right hon. Gentleman selling them short?
On the question of the block grant, will the Secretary of State recycle any grant losses below the £850 million block grant underlying the provisional statement?
The Secretary of State has attempted to paint a rosy picture on capital spending. Why are Welsh housing authorities restricted to using only 15 per cent. of the cash raised from council house sales, when the equivalent authorities in England can spend 20 per cent. of their receipts? The right hon. Gentleman has never explained why he settled for that injustice. Rhondda borough council, which faces a Herculean housing task, has had to sell £10 million-worth of its best mortgages to meet legal requirements on house renovation programmes. Would not an enlarged house building programme make major inroads into the dole queues in Wales?
Will the financial allocations not be insufficient to cope with the worst housing problems in Britain, especially those in the south Wales valleys? The allocations will not help local councils in grappling with the major unemployment crisis that has hit Wales — with more than one in five Welshmen out of work. Is it not true that the allocations are insufficient for the councils of the south Wales coalfields which face pit closures and for those coping with the closures of steel works in north Wales? Bearing in mind the previous niggardly annual settlements, this cash settlement is not at all satisfactory.

Mr. Edwards: The hon. Gentleman has done his best to attack what the Welsh local authorities know to be an extremely good settlement. He talked about a partial retreat. The reason why we have been able to end the target system is that the Welsh local authorities have come so close to achieving the objective that I set them of getting their spending in real terms back to where it was when the Labour Government left office. We have not reduced it below that level. We have simply stopped the upward surge in local authority expenditure.
The hon. Gentleman talked about the penal results for the Welsh districts. I do not understand how he can suggest that the system is penal when it will mean the possibility of a substantial reduction in rates in all but a tiny handful of the Welsh districts if they spend at approximately the expected level of inflation.
The hon. Gentleman asked about the district authorities' request on 90 per cent. GRE, limiters and so on. When the authorities asked me about that at the consultative council meeting this afternoon, I referred them to our previous discussions in that council.I reminded them that over the period during which we have had a separate Welsh rate support grant system, I had met the undertakings that I had given. No one can give absolute guarantees about the exact mechanisms in the period ahead, but just as they, on the whole, have co-operated with the Government under the separate Welsh rate support grant system, so, of course, shall I endeavour to meet the commitments that I have made.
The hon. Gentleman talked about the problems of current expenditure. The provision that we have made is certainly attainable by Welsh local authorities. The Audit Commission has shown the substantial scope that exists for improvements in efficiency and the local authority associations accept that there is room for further savings through efficiency.
I come now to the issue of teachers' pay. If only we could have a settlement and get the NUT to accept the Government's proposals before October, we could make an adjustment in the additional resources which the Government have said could be available for next year. My right hon. Friend the Secretary of State for the Environment made that point. In any case, the level of the settlement does not alter the fact that the Audit Commission's figures and pupil numbers show that scope for reductions exist, as there has been a substantial fall in pupil numbers over recent years.
The hon. Gentleman mentioned recycling. We intend that resources should be retained by Welsh local authorities. I have told local authorities that I intend to discuss with them in the coming months a system that will mean that those resources will return to the low-spending authorities and not to those which have spent at a high level and have therefore incurred reduced grant.
The hon. Gentleman also talked about capital allocations and housing. Decisions on those matters will be taken in the normal way in the autumn. They have not yet been taken. The £15 million to which I referred is a capital allocation which relates solely to the current expenditure performance of local authorities. The hon. Gentleman's argument on the need for capital expenditure in Wales will be considered in the normal way in the public expenditure round and will be announced in the autumn.

Sir Anthony Meyer: Is my right hon. Friend aware that his announcement today will give general satisfaction throughout Wales and will be regarded as a result of the firm and clear leadership that he has given in this matter?
Am I right in thinking that this marks the beginning of a move towards a more rational system of lcoal government financing in which local authorities will have a real incentive to provde the best services that they can at the lowest possible cost, and that it also marks the beginning of the end of the unhealthy situation in which local authorities seek to shift the blame on to the Government for their difficulties, and the Government in their turn blame local authorities for everything that goes wrong?

Mr. Edwards: I am grateful to my hon. Friend for that. He is absolutely right about the incentives provided under the present arrangements. There is a direct incentive for authorities to contain their expenditure, because it enables them to reduce the burden on those who pay rates.
In Clwyd the county precept is projected to rise by only about 2·8 per cent. if the council can limit the year-to-year growth in its spending to 5 per cent. Among the districts, only Colwyn is projected to require a rate increase for spending 5 per cent. more in 1986–87, and even then it is only a tiny percentage increase. Substantial rate reductions are in prospect for several district authorities in Clwyd.

Mr. Alex Carlile: I welcome the Secretary of State's retreat from targets, and also the recent increase in consultation with local authorities, but I wonder whether the new estimated figure for total relevant expenditure for RSG purposes reveals the fact that there will continue to be a decline, in real terms, in the level of housing, planning services and environmental health services provided by district councils. Equally, will


there not be a decline in education and in social, fire and consumer protection services provided by county councils?
Is it not unseemly for the Secretary of State to continue to play the role of the miserly Mr. Bumble, making the Welsh local authorities come to him, month after month, like Oliver Twist, asking for more?

Mr. Edwards: At the start of his question the hon. and learned Gentleman congratulated me on the increased consultation, and in fact I have consulted frequently. At the end of his question he appeared to be complaining because the local authorities discuss these matters with me every month.
The truth is that there is no basis whatever for the hon. and learned Gentleman's suggestion that there need be the cuts in services of which he spoke. We are increasing relevant expenditure by about 5 per cent. —which is more than the expected rate of inflation. Although current expenditure provision is increased by rather less than the expected rate of inflation, it takes account of the fact that the Audit Commission has shown that substantial savings are still possible through greater efficiency.
Local authorities themselves have in the past year or two begun to show that they can make improvements in efficiency without cutting services. Anyone who thinks that there is no further room for improvement knows nothing about local government — either in Wales or anywhere else. That may well be the case with the hon. and learned Gentleman.

Mr. Keith Best (Ynys Môn): Will my right hon. Friend acknowledge the responsible role played by local authorities in Wales, which has enabled him to make the increases in both capital and current expenditure for which so many of us have campaigned?
I acknowledge my right hon. Friend's helpful leadership, and he will know that I welcome the abolition of targets, which I have for long told him were an unfortunate, and, I hoped, temporary, measure. We can now get back to greater local authority autonomy over expenditure?
On my reckoning, should Ynys Môn borough council budget in line with an inflation rate of 5 per cent. next year, it will lead to a rate reduction of 11 per cent. for its people. Will my right hon. Friend confirm those figures? I estimate that that is the seventh largest reduction of any local authority in Wales. That must be good for business locally, and on that so much of our future employment depends.
Finally, will my right hon. Friend confirm that when he comes to take his decisions this autumn he will take into account the large backlog of home improvement grants waiting to be processed?

Mr. Edwards: I certainly acknowledge that my hon. Friend has campaigned relentlessly on the subject of targets. His is one of the many voices to which I have listened on the subject.
I can also confirm the figures that my hon. Friend gave for the Government's projections about possible rate reductions. The actual rate set by any district will depend upon the decisions that the district council takes. When we make our assumptions, we are saying that if councils spend broadly 5 per cent. more than they did in the same budgets

last year, and if they achieve the same balances, figures of this order will be achieved. There is scope for reduction in the rate burden.
I confirm that we shall, of course, consider the backlog of improvement grants when we come to take our decisions on capital in the autumn. I remind my hon. Friend that, as a result of the good behaviour of Welsh local authorities and even before my announcement today, capital expenditure in Wales is twice the level per head of that in England.

Mr. Alan Williams: Is not the only extra freedom announced the freedom to choose between the rack and the thumbscrew? Is not the reality of the Secretary of State's so-called success story today that after his six years in office, and after an extra £40,000 million has gone from the North sea into the Government's coffers, our local authorities are expected to manage on real resources which are no greater than they were when the Government came to office?
Moreover, with the same resources—fewer of which now come from the Government—councils are expected to meet the extra social costs of having an extra 2 million people unemployed and of the essential social costs of services, such as housing benefit, which previously were met by the Government. Is it not a recipe, inevitably, for further cuts? Will the Secretary of State confirm that, of all the Welsh counties, West Glamorgan will lose the most as a result of this so-called improvement?

Mr. Edwards: Welsh local authorities do not share the right hon. Gentleman's view about the proposed change. The Welsh counties, including the representative from West Glamorgan, advocated the change as a great improvement on the previous arrangement.
I acknowledge, of course, that, of all the counties, West Glamorgan will have the greatest difficulty with this change. It will have the largest prospective rate increases, although that is because its expenditure is higher in relation to GRE than that of any other Welsh local authority, and its spending record is greater. That is the explanation.
I am grateful to have the right hon. Gentleman's acknowledgement that we have not cut local government expenditure in real terms, but merely sought to get it back to what it was when his Government left office. I am sorry that he of all people has not yet learned the direct relationship between the level of local authority expenditure and the rate burden and job creation and the viability of businesses in the area. There is no doubt that the local authorities which spend most and rate highest are those which drive away prospective employers.

Mr. Ian Grist: Does my right hon. Friend agree that the synthetic indignation displayed by the Opposition will not be echoed by local authority treasurers, who know that high rates drive away business and cause misery to countless people, that the rate burden counts towards the retail prices index, and that that in turn has an affect on wage settlements and the economy of the whole country? My right hon. Friend is to be warmly congratulated on the leadership that he has given in Wales in this respect.

Mr. Edwards: I am not sure that it is right to talk about synthetic indignation, when only a tiny handful of Welsh


Labour Members have bothered to turn up for this debate. Perhaps they knew that it was not necessary to attack the rate settlement, and that is why they kept away.
I have a word of caution about possible rate effects in South Glamorgan, because that county has made heavy use of reserves in the current year, and I suspect that that may have to be paid for subsequently.

Mr. Ray Powell: When the right hon. Gentleman talks about 1979 and the extent of the rates in Ogwr borough and Mid-Glamorgan county, is he aware of the difference between the situation then and now? When he talks about rating and attracting industrialists to place such as Ogmore and Maesteg, does he realise that his Government's economic policies have caused factories and pits to close? As a result, there are fewer ratepayers to pay rates to the Ogwr borough—not because of the policies of Ogwr borough or the county, but because of the Government's economic policies.
Last week the right hon. Gentleman imposed a restriction, with a total of £844,000 for Mid-Glamorgan and £446,000 for Ogwr borough. When the new procedure comes in next year—I hope, incidentally, that it will be arithmetically correct, unlike the last ones, so that treasurers can reasonably assess the position—what will he say to the 2,000 applicants for council accommodation in Ogwr borough, who were told that under the present system, with the present restrictions by the Secretary of State, they would be lucky to be housed in 10 years' time?

Mr. Edwards: As a result of our ability to control current spending in Wales, there has been a substantial increase in capital allocations for Welsh local authorities. Another £15 million has been announced in the statement, which will help to ease the housing burdens mentioned by the hon. Gentleman and help to provide facilities for the jobs that he wishes to create. That is in marked contrast to the slashing cuts in capital spending which resulted from the pilgrimage of the Labour Chancellor to the IMF during the Labour Government's term of office.

Mr. Keith Raffan: I congratulate my right hon. Friend on once again obtaining such a favourable settlement for Wales. Does he agree that the lesson for local authorities is that if they can get their current spending under control, additional capital resources will be available? Will he persist in that message to Clwyd county council in particular? Will he try to convince its councillors that if they reduce their rates that will help to create more jobs, and that they should concentrate on their statutory obligations and take on board the Audit Commission's message that they are grossly overmanned in some of their departments?

Mr. Edwards: My hon. Friend is right to refer to the relationship between current and capital spending. I believe that in my previous answer I mentioned £15 million extra, when the figure should be £11 million.

Mr. Barry Jones: Wrong again.

Mr. Edwards: That is characteristic of the childish conduct of the hon. Member for Alyn and Deeside (Mr. Jones). The day on which he announced additional capital spending for Wales would be a day indeed.
If Clwyd county council manages its affairs sensibly, there will be a very modest rate increase. In the hon. Gentleman's borough, there is the prospect of a rate reduction.

Dr. John Marek: I hope that Clwyd county council will look after the needs of its people and not apply policies advocated by the hon. Member for Dlyn (Mr. Raffan). The Secretary of State said that he had consulted the county associations and that they were fairly agreeable to the new regime. Does he not think that the local authority associations feel themselves to be under the hammer and that they will accept any crumb from the table? Does he not also think that they loathe the policy of incessant meddling in local government practised by the Government since 1979 and that they detest the centralised Whitehall jackboot policies that have been pursued?
Is there anything that the Secretary of State can do to exempt local authorities which want to encourage industrial development in their areas — he must remember that the Government's economic policies are falling to pieces with the continuing increase in unemployment — from capping and return of block grant? Or can he improve the safety net so that they can spend on industrial development without detriment to any of their other functions?

Mr. Edwards: The hon. Gentleman talks about centralisation. He seems to forget that the Government introduced a separate Welsh rate support grant system, which has been widely welcomed by Welsh local authorities. They know that it has been administered so as to produce enormous benefit to Welsh local authorities and that their relative position has been much improved because they have behaved more sensibly than many extreme Labour authorities in England. The best contribution that the hon. Gentleman's local district can make to industrial recovery in Wrexham is to spend in line with or below inflation. There will then be the prospect of a 16 per cent. rate reduction. I can think of no more substantial contribution to attract industry.

Mr. Barry Jones: The right hon. Gentleman has recently given many wrong answers to questions, both in the Chamber and in Committee. He has also presented faulty documents. When he next has a statement to make, I shall be prepared to go over it with him beforehand.

Mr. Edwards: Once again the hon. Gentleman, who takes his responsibilities so seriously, has not bothered to listen. The statement was perfectly correct, but, in answering a question across the Dispatch Box, I gave a figure which I immediately corrected. I also note, and I hope that the people of Wales will note, that that is the only criticism that the hon. Member is able to make of the settlement, which he knows is one of the best rate support grant settlements to be given to the people of Wales in many years.

Liverpool City Council

Mr. Eric S. Heffer: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 10, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the position of the Liverpool city council arising out of the statement made by the Secretary of State for the Environment today plus the already serious rate and budgetary problems in the city which, unless resolved by negotiation, can lead to cuts in services, loss of jobs and possible surcharges and disqualification of councillors.
I think that the matter is specific because clearly there is a serious problem in the city. It is important because people's futures are at stake. Councillors could have their homes taken from them and their wives and families placed in great difficulties and Liverpool city council workers could find themselves out of work and on the streets. It is also urgent because the matter will clearly develop to a greater degree unless negotiations take place before the end of the recess. I honestly believe that serious problems of unrest in Liverpool could arise unless the matter is resolved by negotiations. It is therefore important for the House to debate the matter before we rise for the recess.

Mr. Speaker: The hon. Gentleman asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
the position of the Liverpool city council arising out of the statement made by the Secretary of State for the Environment today.
I have listened with the greatest care to what the hon. Member has said, but I regret that I do not consider that the matter which he has raised is appropriate for discussion under Standing Order No. 10 and I cannot therefore submit his application to the House.

ROYAL ASSENT

Mr. Speaker: Order. I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Acts:

1. Finance Act 1985.
2. Appropriation Act 1985.
3. Interception of Communications Act 1985.
4. Sporting Events (Control of Alcohol etc.) Act 1985.
5. Trustee Savings Banks Act 1985.
6. Wildlife and Countryside (Service of Notices) Act 1985.
7. Child Abduction and Custody Act 1985.
8. East Lothian District Council (Musselburgh Links, etc.) Order Confirmation Act 1985.
9. Shetland Islands Council Order Confirmation Act 1985.
10. Hastings Pier Act 1985.
11. Oxfordshire Act 1985.

Social Security

The Minister for Social Security (Mr. Tony Newton): I beg to move,
That the draft Social Security Benefits Up-rating Order 1985, which was laid before this House on 5th July, be approved.
I understand, Mr. Speaker that it would be for the convenience of the House to take with this the following motions:
That the draft Supplementary Benefit (Requirements) Amendment and Up-rating Regulations 1985, which were laid before this House on 8th July, be approved.
That the draft Supplementary Benefit (Resources) Amendment (No. 2) Regulations 1985, which were laid before this House on 8th July, be approved.
That the draft Child Benefit (Up-rating) Regulations 1985, which were laid before this House on 5th July, be approved.
That the draft Family Income Supplements (Computation) Regulations 1985, which were laid before this House on 5th July, be approved.
That the draft Housing Benefits (Increase of Needs Allowances) Regulations 1985, which were laid before this House on 5th July, be approved.
That the draft Pensioners' Lump Sum Payments Order 1985, which was laid before this House on 5th July, be approved.
That the draft Vaccine Damage Payments Act 1979 Statutory Sum Order 1985, which was laid before this House on 22nd July, be approved.
That the draft Social Security Benefit (Dependency) Amendment Regulations 1985, which were laid before this House on 22nd July, be approved.
That an humble Address be presented to Her Majesty, praying that the Housing Benefits (Miscellaneous Amendments) Regulations 1985 (S.I., 1985, No. 1100), dated 16th July 1985, a copy of which was laid before this House on 17th July, be annulled.

Mr. Speaker: Is that for the convenience of the House?

Mr. Michael Meacher: Yes, Mr. Speaker.

Mr. Speaker: So be it.

Mr. Newton: The orders are accompanied by a report from the Government Actuary on the effects of the proposals on the national insurance fund and by a statement from my right hon. Friend, the Secretary of State, on the background to the uprating proposed for the mobility allowance.
The statutory instruments put into effect the uprating of social security benefits announced in the House on 18 June by my right hon. Friend the Secretary of State. They also provide for the payment of the £10 Christmas bonus, an increase in vaccine damage payments and other changes to which I shall come later in my speech.
As the House is aware, it is the Government's intention that this should be the last November uprating before the move to annual upratings which will take place from April 1987. To pave the way for that change, we have taken powers in the Social Security Act 1985 to enable us to undertake the 1986 uprating in July — four months earlier than usual. The result is that after November 1985 there will then be two upratings at eight-month intervals, in July 1986 and April 1987. That move has been welcomed as sensible on both sides of the House and well beyond it.
Rather than catalogue the details and technicalities of each of the orders, it will be more helpful if I merely remind the House of the main features of the upratings and then deal with some of the issues upon which it seems right to comment further.
For the majority of benefits, including retirement pensions, unemployment benefit, widow's benefit and war pensions, the uprating orders provide for an increase of 7 per cent.—the full measured increase in the retail price increase in the 12 months from May 1984 toMay 1985. For a single person, the retirement pension will increase by £2.50 per week — from £35.80 to £38.30; for couples the increase will be £4 a week—from £57.30 to £61.30. The full rate widow's pension will rise in line with the single person's retirement pension.
Those increases, once again, clearly fulfil the Government's firm and continuing commitment to protect the value of the basic retirement pension. As the House is aware, since the Government first took office in 1979, that promise has been more than fulfilled. When this increase takes effect in November 1985, pensions will have increased by about 96 per cent. since November 1978— 10 per cent. more than the expected rise in prices over the same period.
I should emphasise, because it is a point that is not always sufficiently appreciated, that that improvement in the pension's real value has been achieved at the same time as the number of retirement pensioners has increased by about 800,000, taking the total number of retirement pensioners from 8·3 million to 9·1 million. Against that background, the Government's record of more than maintaining the value of retirement pensions is one of which my hon. Friends can be proud.
Alongside those increases in pensions and many other benefits, the supplementary benefit and the housing benefit needs allowances will also be appropriately increased by the orders. In the case of supplementary benefit, the increase is 5·1 per cent., in line with the increase in the retail price index between May 1984 and May 1985, less the element of housing costs. As the House is aware, that difference in uprating methods merely reflects the fact that for those on supplementary benefit housing costs are, for the most part, met separately through the housing benefit system.
With regard to housing benefit, the needs allowance generally will be increased by between 5·5 and 6·2 per cent., again in accordance with the usual rather complicated formula. The one exception is the child's needs allowance, which is being increased by more than the usual formula would have required.
While talking about housing benefit, I should refer to the uprating of non-dependant deductions. That has been the subject of some comment. It is also provided for in the regulations before the House. The purpose of non-dependant deductions is to take account of the contribution towards housing costs which is assumed to be made by a non-dependant living in a beneficiary's household. The deductions are therefore uprated in line with changes in housing costs. That formula, which follows previous practice under the supplementary benefit scheme, has been in place since the introduction of the housing benefit scheme. The same formula is also applied to the supplementary benefit non-householder housing addition. The normal method of uprating the non-dependant deduction and that non-householder housing addition in supplementary benefit has been applied this year.
I am aware that anxiety has been expressed that the statement and schedule accompanying my right hon. Friend's statement on 18 June did not include the figures for those deductions. As I explained in a written answer to the hon. Member for Oldham, West (Mr. Meacher) on


8 July, we were following previous practice. On this and previous occasions, the practice has been for the uprating statement to give details of increases in the main weekly benefit rates but not increases in the considerable number of minor benefit items.
It was solely for that reason that the increases in non-dependant deductions were not referred to. Clearly the House has the opportunity to consider them, as it does this afternoon, when the relevant statutory instruments are laid before the House. Nevertheless, having said that, I hope that I have made it clear, against the implications that the hon. Member for Oldham, West sought to establish earlier — that there had been some attempt to conceal, abnormally, what the proposals and the uprating methods were — that there was no departure from previous practice.
In view of the comments made on this occasion, we shall clearly have that matter in mind when considering what should be put in the scheduled list of the uprating of benefits next year. I am glad to see the hon. Member Oldham, West nodding, because we do not wish to convey the impression, which he evidently first gained, that we have in some way sought to conceal matters. That was far from our intention. [Interruption.] I am sorry to see the hon. Member for Birkenhead (Mr. Field) conveying some disbelief at that statement. I hope that I have made it clear that we were merely following normal practice.
Before leaving the issue of housing benefit, I should refer to the proposal contained in my right hon. Friend's uprating statement to increase the rates taper from 9 to 13 per cent., which does not feature in the orders before the House. That proposal is not contained in the orders because, unlike others in respect of housing benefit contained in the uprating, it is subject to consultation with the local authorities, and we wish to ensure that adequate time is allowed for that process of consultation and then for us to consider the responses that we receive. When we have considered them, we shall take the action necessary to implement the conclusions at which we arrive. No doubt the House will want to have the opportunity to debate whatever proposal is put forward when it resumes in the autumn.
I wish to deal with benefits for families. The House will be aware that the orders provide for an increase in child benefit of 15p — from £6·85 to £7. The Government have made clear their continuing view that it is right to maintain child benefit as a non-means-tested, non-taxable benefit normally payable to the mother, and the fact that it is inevitably necessary to make a judgment about the appropriate level at the time of each uprating decision and to make that judgment in the context of social priorities and the social security budget as a whole.
On this occasion—this is a subject that the House has already debated—we concluded that that increase to £7 was the appropriate increase for child benefit generally, and that it was right to make a special increase at the same time in those aspects of benefit which apply to lower paid families in work with children. I now come to those changes.

Mr. Frank Field: How much money will the Government save by not uprating child benefit in line with prices? As to the increases in the other benefits for families, how much of that money saved will be paid in

benefit? When the new family credit comes in. will there be a commitment to use all the savings from child benefit to finance that?

Mr. Newton: The answer to the first half of the hon. Gentleman's intervention is that in a full year the saving from the uprating to £7, rather than a 7 per cent. increase to take account of the rise in prices over the full year from May to May, is £175 million. The cost of the various measures to which I am about to turn in respect of lower income families is about £26 million in a full year.
The answer to the second half of the hon. Gentleman's question is that, just as we must make a judgment in the context of this uprating about the appropriate level of child benefits, when we come to make decisions about the rates to be set in relation to such proposals as we may implement following the review, we shall also have to make a judgment on the balance of all considerations in the context of the social security budget as a whole.

Mr. Field: Does the hon. Gentleman realise that that is a change in the Government's position from the time of the uprating statement? The Secretary of State then said that the reason for this cut in child benefit was to enable money to be targeted on the poorest. Clearly he is now leaving the option for some of that money to be taken from families to be given in tax cuts to single people. That is hardly targeting.

Mr. Newton: I do not accept that there is any difference in meaning or emphasis from what I have said now and on previous occasions and what the Secretary of State has said on previous occasions. Our positon is quite clear. We believe in maintaining the child benefit system in the terms in which I have just presented it. We also believe that it is right to accord particular priority—in looking at the social security structure as a whole and, particularly, when considering the balance of benefits for families—to the needs of lower paid families, especially such families in work. The hon. Gentleman is straining a bit in suggesting that there is some major change in emphasis in what I have just said.

Mr. Meacher: My hon. Friend the Member for Birkenhead (Mr. Field) has raised an important point. The Minister has said that in real terms the cut in child benefit is about £175 million. As my hon. Friend pointed out, the Secretary of State said that the motive was to concentrate resources on families in greatest need. Will the Minister confirm that the value of the improvement in family income supplement and housing benefit child needs allowance together comes to about £23 million, which is about only 13 per cent. of the cut in child benefit?

Mr. Newton: Had the hon. Gentleman been listening about three minutes ago he would have heard me give the figure, which is around £26 million, but I do not seek to build too much on that.
As the House is aware, these orders propose an increase in family income supplement prescribed allowance by more than 7 per cent. and introduce an element of age relation into the scheme by setting new higher prescribed amounts for families with older children. The new prescribed amounts for a one-child family will be £97·50 a week where the child is under 11; £98·50 where the child is 11 to 15 years old; and £99·50 where the child is 16 to 19 and still at school. For each additional child the prescribed amount will increase by £11·50, £12·50 and £13·50, again depending on the age of the child.
As well as targeting help more effectively, this measure will help mitigate the effects of the unemployment trap, which is a matter of concern to hon. Members on both sides of the House, by aligning more closely the rates paid to low-income working families with children and the rates paid to families who are unemployed and receiving supplementary benefit. To the same end, we are increasing the housing benefit child needs allowance by about £1 a week more than a normal uprating would require.
I should also emphasise that we are increasing one-parent benefit by the full extent of the 7 per cent. general uprating from £4.25 a week to £4.55 a week. The children's scale rates within the supplementary benefit scheme—which apply to the least-well-off families out of work—are also increased by the full supplementary benefit uprating percentage.
Taken together, those measures targeted to low-income families, and especially to low-income working families, are of very significant additional help to such families, especially when taken with the changes in national insurance contributions that were announced in the Budget and that are due to come into effect in October this year.
To give some idea of the importance of those changes taken together, if I compare what we are proposing, including the national insurance changes, with what would have happened had a normal uprating been carried out, it shows that a married couple, with one child aged 3, with gross earnings of £80 a week will be £2.02 a week better off than they would otherwise have been; a married couple on the same earnings with two children aged 4 and 6 will be £2.43 a week better off than they would otherwise have been; and a married couple with three children aged 3, 8 and 11 will be some £3.18 better off. I know that on this at least I shall carry the hon. Member for Birkenhead with me in regarding those as useful improvements for a group of the population for whom in the past we have perhaps not done enough through the social security benefits system or in other ways.

Mr. Field: The Minister certainly carries me with him on that point, but are not his considerable debating skills yet again being used in the Chamber to disguise a significant change in Government policy? Until very recently the Government were concerned with two objectives—the living standards of poor families and the living standards of all families. Is there not now a marked change? While there is concern for the very poorest—although some of us may debate how effective the changes are — the Government have gone back on their commitment to ensure that living standards and the tax burden are shared equally between those with children and those without. Is not that a very significant change indeed?

Mr. Newton: I do not believe that the Government have gone back on their commitment, although I accept that in the context of this uprating there is a difference of opinion between the Government and the views held by the hon. Gentleman about how that commitment is best fulfilled. He will have read what has been said in the social security review Green Paper and will be well aware of the emphasis placed in that paper on the needs of families with children. But particularly—and we do not run away from the word "particularly"—the emphasis is on the needs of low-income families with children, not least on low-income families in work who have children. That is a sensible reflection of sensible social priorities.
I wish to turn to the questions arising from these orders relating to benefits for disabled people. I remind the House that, in line with the general uprating figures, mobility allowance will rise from £20 to £21·40 a week. That means that it has far more than doubled since the Government took office. The higher rate of attendance allowance will rise from £28·60 to £30·60. The lower rate of attendance allowance will rise from £19·10 to £20·45. The rate of severe disablement allowance—the replacement for noncontributory invalidity pension—will go up from £21·50 a week to £23.
I wish to draw particular attention to the fact that those on the contributory invalidity pension will receive an uprating well beyond the rate of inflation at 7 per cent., and in all that will amount to an increase of 12 per cent. That will be worth more than £4 a week to single beneficiaries and £6·50 a week to married couples. That is because, as the House is aware, we are restoring the 5 per cent. abatement of invalidity pension, despite the fact that at present there are no immediate plans to bring the benefit into taxation, even though we have always said that that is the intention in the longer term.

Mrs. Margaret Beckett: Will the Minister confirm that nevertheless the changes in the offset of the additional component in the invalidity allowance mean that the Government are making a net saving?

Mr. Newton: I was about to come to the other changes that I would not wish to disguise from the House. One of them is covered in the regulations, and I wish to make particular reference to it. The hon. Member for Derby, South (Mrs. Beckett) has already referred to an aspect that is not covered in these regulations but which is covered in the Social Security Bill that was passed earlier this week, and that is the measures we have taken in relation to the invalidity allowance addition, which is paid at a higher rate to those who become sick and disabled at an early stage in their life, as against the earnings-related additional component.
I wish to refer to another aspect, the way for which was paved in the Social Security Bill. It is also reflected in the Social Security Benefit (Dependency) Amendment Regulations which are part of the package that we are debating. It provides for a new form of earnings rule for adult dependants of recipients of certain long-term benefits. As the hon. Lady knows from my replies to parliamentary questions, we intend to set the level of the new earnings rule—which is an equal treatment earnings rule that extends our provisions for equal treatment under the social security system—at the rate of unemployment benefit, which is now £28·45 a week. It will be increased to £30·45 a week from November.
We intend to apply the earnings rule to the wives of invalidity pension husbands and also to the husbands of invalidity pensioner wives. 'The net effect is to create a more generous rule for the husbands of women who are in receipt of long-term benefit, in particular invalidity pension, but it is a rather less generous rule than the present one for the wives of men who are receiving a similar range of benefits. By linking the level of the earnings rule to the rate of unemployment benefit, we ar adopting a common sense position. By the time people are earning more than they could achieve on their own contribution record if they were out of work, it is hardly sensible to regard them as any longer dependent upon


somebody else who is receiving social security benefit. We shall also ensure that the earnings rule is regularly increased. It will be increased in line with changes in unemployment benefit.
I should emphasise that this measure will come into effect on 16 September but that there will be no cash losers. It will apply only to new claimants after that date.
The hon. Member for Derby, South has already expressed interest in the last point I wish to make on this subject. Originally we said that as part of a series of changes that would affect invalidity pensioners we intended to move to fortnightly payment of benefit in arrears. The hon. Lady has been probing me about the Government's intentions. She will by now be aware that, in the light of the general proposition in the social security Green Paper to seek more consistency and greater alignment between the payment mechanisms and other forms of rules affecting a whole variety of social security benefits, we have thought it right to defer the implementation of that proposal and to give further consideration to it in the wider context of the Green Paper.
I turn to a number of particular supplementary benefit issues other than the general uprating of supplementary benefit with which I have already dealt. We propose to make two changes to the supplementary heating additions which will be uprated generally by the rise in fuel prices. This was 4·4 per cent. between May 1984 and May 1985. First, we intend to limit the central heating additions. They were introduced in the early 1960s when the few claimants with central heating undoubtedly spent more than other claimants on fuel. The position has changed markedly. About half of all claimants now have central heating. Central heating is more efficient than most other systems of heating houses. Claimants with gas and electric central heating systems spent less, on average, on heating than claimants without central heating.
In these circumstances, we have decided to make no further awards of such additions in this category to claimants after 5 August. Claimants who were entitled to central heating additions before 5 August will receive them while they are still on benefit and remain eligible under the current rules, but from that date no new central heating additions will be awarded to new claimants. I want to emphasise that other heating additions will continue under a variety of headings. I re-emphasise the point I made at the beginning: all heating additions are being uprated to the full normal extent—that is, by the price index that measures the increase in fuel costs.

Mr. Bruce Milian: The Minister has not provided figures for the savings on central heating allowances. However, in a full year they amount to about £55 million. No fewer than 1 million families will be affected. Is he aware that a number of hon. Members disagree fundamentally with his statement about central heating costs? In many cases they are a burden to families. I have received representations on this point from a number of constituents. If expenditure upon this kind of heating allowance is not as high as it might be, it is because people feel that they cannot afford to turn on the heating. This causes widespread concern among the elderly, especially since this rule has been introduced at such short notice. Many hon. Members are anxious about a saving of

this kind being slipped through in what appears to be a rather surreptitious way, although large sums of money are involved.

Mr. Newton: It can hardly be said to be surreptitious when my right hon. Friend the Secretary of State for Social Services devoted the best part of a paragraph of his statement on 18 June to this point. Savings are involved. The figure for a full year will be about £38 million. It will increase in future years because claimants who are already on benefit and in receipt of a central heating addition will continue to receive it. So the effects are not quite the same as they would be with a normal social security change.

Mr. Millan: The figure I was given in a parliamentary answer relates presumably to savings which take into account the fact that present recipients will continue to receive the addition, unless they come off benefit, however temporarily. The figure that was given in a parliamentary answer was £55 million for a full year.

Mr. Newton: I suspect that the difference between us is that the figures I have in front of me relate to 1986–87, whereas the right hon. Member is referring to 1987–88. That ties in with my point that this builds up a little, because existing claimants are protected. To pick up the main thrust of the right hon. Gentleman's point, those who are already in receipt of supplementary pension will be protected in the way that I have already stated. Moreover, any householder over the age of 65 will receive a heating addition.

Mr. Millan: But at a lower rate.

Mr. Newton: No, not necessarily at a lower rate. Anybody who is over the age of 85 will receive a heating addition at a higher rate than this. That would nullify any central heating addition to which they were entitled. We give the claimants the highest heating addition to which they are entitled. A significant number of pensioners below the age of 85 may be in receipt of higher heating additions under other provisions, including those that are directed to the need of the long-term sick and the disabled. Although I understand the right hon. Gentleman's point and the point that no doubt the hon. Member for Birkenhead is burning to make, I would ask them not to overplay their hand when considering the effect of these proposals.

Mr. Frank Field: As the Minister for Social Security is anxious that I should not overplay my hand, and as he therefore thinks that the point I am about to make is not very important, may I ask him whether I am right in saying that after 5 August people will cease to be eligible for a heating addition on the ground that they have central heating? As the point I am making is so unimportant and as the costs involved will, presumably, also be unimportant, can the Minister say 'what steps he will take between now and 5 August to tell those of our constituents who are eligible for this benefit that they should put in a claim before 5 August because on 6 August they will cease to be eligible? Will he be appearing on the popular radio and television programmes to get that message across?

Mr. Newton: I shall not seek to conceal that information from anybody who wishes to have it. The fact that the hon. Gentleman has raised the point in that way will, I hope, be a helpful additional means of bringing this fact to the attention of those who may be affected.
Another point, which is relevant to the point made by the right hon. Member for Glasgow, Goven (Mr. Millan), is that the central heating addition is paid at two rates. The lower rate of central heating addition is the same as the rate of heating addition for all pensioner householders over 65. There is sometimes a tendency to talk about this measure as if all central heating additions were paid at the higher rate rather than the lower, and therefore to assume an effect on pensioners beyond what the facts would sustain.
The other point about central heating additions. on which I would also hope to carry the right hon. Member for Govan and the hon. Member for Birkenhead, is that we have proposed to extend the lower rate of heating addition, which would be worth £2·20 a week from November for all sick and disabled householder claimants on the long-term rate of supplementary benefit. We expect that proposal, which will cost about £1 million—I accept that it is a modest cost—in a full year will benefit about 18,000 claimants.
An indirect effect of the approval of the Social Security Benefits Up-rating Order is that the specified sum—that is, the amount deducted in accordance with section 6 of th Social Security (No. 2) Act 1980 from the supplementary benefit payment payable for the dependants of strikers—will increase automatically at the time of the uprating by 7 per cent. which, rounded down in this case, would take the figure from its present level of £16 to £17 from 25 November.
That change happens automatically unless the Government lay regulations before the House to prevent the automatic application of the primary legislation, and we have decided not to do that. My right hon. Friend will, as usual, make a declaratory order before the effective date simply to put the change on the official record in the normal way.
I move now to the board and lodging regulations and payments under them. The limits on payments for board and lodging do not form part of the regulations before the House, but, when we announced the new limits in March, we undertook to review those limits within a year of their coming into effect in April and to give a further sign of our thinking at the time of the uprating. As the House knows, we have set in hand extensive arrangements for monitoring the operations of the revised board and lodging rules as well as commissioned further research. We hope, by the turn of the year, to have results that will enable us to conduct a comprehensive review of the limits. At the same time, we intend to review the level of the meals allowance for boarders and people of no fixed abode.
The hon. Member for Derby, South asked a parliamentary question today about my next point. We are not uprating the meals allowance in November. That allowance already stands at nearly £30 a week—£29·40 to be precise—which is more than the total benefit available to most non-householders for all purposes and not just for meals. We have had several representations about this anomaly and we think it right to give it further consideration in the context of the board and lodging system as a whole and of the review.

Sir Anthony Meyer: Can my hon. Friend give any comfort or reassurance to a constituent of mine who has written to me about her mother, who suffers from senile dementia, but is in a residential home rather than a nursing home because she does not require nursing? It looks as though she will be hit

by the new limits. I understand that my hon. Friend will be reviewing this, but is there any immediate comfort for my constituent or does she have to await the outcome of the review?

Mr. Newton: I may be able to give some immediate comfort, and I shall return to that point in a moment. Before doing so, having referred to the meals allowance, I should also refer to the other half of the question asked by the hon. Member for Derby, South. I have answered her parliamentary question in rather terse terms in expectation of being able to fill out the information that I gave her. We intend to increase in the normal way all the personal allowances within the system. I shall not give the full list in the regulations, but I shall give the main representative examples.
The personal expenses allowance for residents in private and voluntary residential care and nursing homes will rise from £8·50 to £8·95 a week. The rate for people on the ordinary rate of benefit: in other circumstances who are single will rise from £9·25 to £9·70 a week and the long-term rate for a single person will rise from £10·30 a week to £10·85 a week. The other aspects of the personal expenses allowance, which constitute a list rather more than three times as long as that, will rise in the same way. I hope that the hon. Lady will welcome that.
I return to the point made by my hon. Friend the Member for Clwyd, North-West (Sir A. Meyer). When we referred to our intention of reviewing the limits by April 1986, it was both our expectation and that of the House that it would be appropriate to make changes to the limits, probably in April 1986. Since then, there has been a significant new development in the proposals that we have put before the House in the social security Green Paper which is to change the uprating base, on our current plans, in July 1986. That will make it very difficult and undesirable for us to be conducting changes in the social security system affecting significant numbers of claimants in April 1986 because of the work, on which our officers are already engaged, to carry out the July 1986 uprating.
In those circumstances, we felt it right to consider whether we should make any changes as part of the general uprating of benefits this November, which had not been our original intention. We shall in any case keep these matters under continuing close scrutiny in the light of the monitoring to which I have referred and in the spirit of our willingness, which I have clearly demonstrated in recent weeks, to make appropriate changes in these regulations where the need is shown.
I can tell the House and my hon. Friend that we believe that it would be right, at the time that the uprating takes effect in November, to make some increase in limits for residential care and nursing homes. We intend to increase the limits for all types of residential homes by £10 a week so that the range for these limits will now run from £120 a week to £180 a week instead of from £110 to £170. We also intend to increase the supplement added to these amounts for nursing homes, which at present stands at £28·60 a week, to £50 a week. That means that the limits for nursing homes will be increased by nearly one quarter and will, after November, fall in the range of £170 a week to £230 a week.
We have already provided some scope for greater partnership between my Department and local authorities by allowing local authorities to add in some circumstances to the amounts that they can pay as topping-up provisions


in board and lodging payments. Over the next few months, I propose to explore with the local authority associations and others who are concerned whether there is room for building on this beginning by making these arrangements still more flexible, and we shall have particularly in mind the position of people over pension age.
The order that does not run along with the normal social security and housing benefits orders is that concerned with vaccine damage payments. The order will double the amount paid in vaccine damage cases from £10,000 to £20,000 for claims made on or after 18 June. This matter was the subject of some discussion in the House when we debated Lords amendments on the Social Security Bill earlier this week and it was widely welcomed on both sides of the House as a move which improves the position of those unhappy families suffering from these problems. It takes the value of the payment beyond what inflation alone would have required since payments were introduced in 1979. I believe that this improvement will be warmly endorsed by both sides of the House.

Mr. Meacher: We welcome this increase, but there is a great deal of feeling that this method of payment is inadequate and that weekly payments, as is the case in New Zealand, and the Pearson proposals for strict Government liability would be preferable. Will the Government look seriously at those alternatives?

Mr. Newton: I made some comment about this in the debate on Monday and I do not wish to add to what I said. As the hon. Gentleman knows, and as I said on Monday, it is well within the knowledge of hon. Members that the Government have put in hand the largest ever survey of the extent of disablement and its effects with a view to reviewing a wide range of issues, and in particular social security benefits affecting disabled people.
That does not relieve us of looking at the scheme brought forward by the Labour Government in the late 1970s, under which the payment has undoubtedly been eroded by inflation. We are doing something about that problem within the context of existing legislation by amending the Social Security Act, and by bringing forward the regulations to provide for the increase from £10,000 to £20,000 which I have described.
Given the terms on which vaccine damage payments are made, it is virtually certain—I might say certain if I were not such a cautious man at the Dispatch Bax—that any child in respect of whom a vaccine damage payment has been made will automatically qualify for severe disablement allowance, which also operates on an 80 per cent. disablement test when the child reaches the age of 16. There is some controversy about whether weekly payments should be made before that age, but certainly a child who was subject to a vaccine damage payment would be likely automatically to qualify for a weekly payment of benefit on reaching school leaving age. That goes at least some way to meeting the point made by the hon. Gentleman.
The uprating of benefits, which is the main effect of this package, will cost over £2,000 million in a full year. As I have said, not only have we kept our pledge to maintain the value of pensions and linked long-term benefits, but we have also protected from inflation the great majority of other beneficiaries. At the same time, we have managed

to direct help to low-income working families who need help most. That is a considerable achievement, and I invite the House to endorse the orders.

Mr. Michael Meacher: As the Minister said in outlining the broad intention of most elements of what is a farrago of uprating orders, there is no common theme behind today's debate. That does not mean that some important issues in the current development of social policy are not illustrated by these orders. Like the Minister, I want to concentrate on certain of those principles.
The uprating orders deviate substantially from the simple objective of compensating for inflation. The main reason for that is that they are a dry run for the Fowler Green Paper. In several important respects they anticipate and prepare the ground for it, even though that makes a travesty of the whole idea of the consultative process. Under this Government, consultation over social security is something of a sick joke, bearing in mind the number of times the Government have disregarded the advice of their review committees and their Social Security Advisory Committee.
These orders pre-empt the consultative process in at least three significant ways. They increase child benefit by only 2·2 per cent. instead of the full 7 per cent. required to maintain its value. The Green Paper does not specifically state that the real value of child benefit will be cut, but that is the clear implication of paragraph 4(49) which says:
The Government believe that it will be right to give greater priority to assistance for families in the income range covered by family credit than to the assistance given to families as a whole through child benefit.
The Government are already implementing that policy by raising the family income supplement prescribed limits by between 8·3 and 10·6 per cent. So much for the Green Paper charade. The Government obviously made up their mind on family benefit some time ago. The same applies to housing benefit where the tapers above the needs allowance for rates are to be increased from 9 to 13 per cent. This pre-empts any consideration of the Green Paper proposal in paragraph 3(56) which says:
the income-related taper for rates should be steeper than underthe current scheme
The change under today's uprating order more or less exactly meets the Green Paper's aim, because a rate taper of 13 per cent. combined with a rent taper of 29 per cent., which is the current level, will produce a combined total of 42 per cent., and that is on gross income. It is surely hardly a coincidence that that is roughly equivalent to a 70 per cent. taper on net income, which just happens to be the illustrative figure used in the Green Paper.
Another example of this same pre-empting of what is misleadingly called a Green Paper lies in the abolition of the supplementary additions for central heating to which the Minister referred at some length. As the House knows, the Green Paper proposes the abolition of all additional requirements and their replacement by various client group premiums. We know that this is actually being implemented in respect of central heating additions for new claimants with effect from 5 August. In other words, it is being implemented six weeks before the consultation period is completed. So much for the Green Paper. I suggest it is a hard shade of white, and for many thousands of claimants it will be somewhat tinged with black edges.


What is the point of a so-called Green Paper if it is followed not only by a consultation period which is absurdly short, but one which is foreclosed by action taken to implement policy proposals?

Mr. Frank Field: Is it not sensible for the Government to have a short consultation period? After all, they appear unwilling to pay much attention to what we have to say. Surely it would be worse for them to lengthen the process.

Mr. Meacher: My hon. Friend has made explicit what was implicit in my argument. Not only have the Government disregarded in the review exercise their own Social Security Advisory Committee, but they have disregarded the opinions of almost all the pressure groups. A short consultation period extending over two summer months is entirely consistent with that. The Government are not listening to any of the acknowledged experts in the field of social security. Moreover, they are not listening to public opinion, which is more important. Successive opinion polls and a recent Mori poll show that people are not behind the sort of cuts in the Green Paper, and most people want to see the welfare state preserved, even restructured, but not cut back and they want to see an increase in expenditure, particularly in the Health Service.
It is not just a matter of the niceties of consultation, because there is another underlying motive in the Government now pre-empting the Green Paper's objectives and that needs to be brought out. It is that it enables the Government to reduce the losses at the time of changeover in April 1987. By making cuts now of £175 million a year through a lower child benefit uprating, cuts of £38 million by ending new awards of central heating additions, and cuts of £57 million through increasing the rates taken for housing benefit, we have a total cut of £270 million a year. I know that it is offset by about £20 million of increases, but that is a net loss of £250 million.
The Government will announce losses to claimants through the Green Paper changes in April 1987, when they finally get around to doing that, that are much less than they would be otherwise able to claim. That is why the cuts are being made now, although, in all fairness, they should have been included in the overall evaluation of Green Paper cuts, when they finally emerge in 1987.
Another myth surrounding the upratings that must be exposed is the boast, made belligerently by the Secretary of State in his uprating statement on 18 June, that the overall cost of increases in the upratings—£2 billion in a full year—demonstrates the Government's generosity. He was clear about that and belittled me when I suggested otherwise. The fact is that it does nothing of the sort. The Government are doing little more than the bare minimum required by the law on national insurance benefits, or by practice and pledges in the case of supplementary and housing benefits.
The fact that there was leeway for generosity if the Government wished it is revealed by the contrast—I often point out this contrast—with the Budget of 19 March this year. The Chancellor of the Exchequer increased the principal income tax allowances by almost 10 per cent., which was more than double the 4·6 per cent. required by the statutory indexation formula at the time. The cost of increasing the tax thresholds according to that formula would have been about £800 million, yet the Government chose to spend no less than £1·6 billion on them. They did so despite the fact that tax reliefs are

indiscriminate, contrary to the Government's repeated insistence that expenditure should be focused on those in greatest need.
The contrast between the Government's willingness to spend on increasing tax thresholds and their reluctance to spend on benefits is especially stark in the case of child benefit. Child benefit was intended to be a replacement for child tax allowances at the end of the 1970s, and was seen as a first step in the introduction of a tax credits scheme, which the Tory party favoured throughout the 1970s. Indeed, in 1975, the present Minister for Health, who held a different portfolio then, said on behalf of the Conservative Opposition in a debate on the Child Benefit Bill that we should have index-linking on precisely those grounds. How bedraggled and miserable that Tory promise on child benefit, so proudly made 10 years ago, looks today.
Another theme runs through the uprating orders. Benefits are uprated according to the barest minimum that is legally required, but deductions in benefits are being increased far faster than any inflation formula could justify. The Minister frowns, but I am sure that he knows what I mean. The 18 per cent. increase in non-dependant deductions is, by any standards, exceptionally severe. The Minister glided over his justification for that extremely quickly. I thought that he was merely telling us that the method by which he communicated it to the House was in accordance with normal custom. He did not seem to defend it.

Mr. Newton: Nothing will stop the flow of the hon. Gentleman's rhetoric, but he suggested that no conceivable uprating basis could underlie the figures. The fact is that they are the measured increases in the retail price index element for housing costs, which was 18 per cent. Similarly, we have uprated heating additions in accordance with the increase in fuel prices; clothing additions by the increase in clothing prices; diet additions by the increase in food prices; and supplementary benefits by the increase in the retail price index, less housing costs. We have uprated the non-dependant deduction and the non-householder housing additions, which are specifically related to housing costs, by the increase in housing costs.

Mr. Meacher: That sounds reasonable until one remembers that the bulk of the increase in housing costs between May 1984 and May 1985 was caused by the huge increase in mortgage rates. During that period, the mortgage interest element of the retail price index increased by no less than 50·8 per cent. I should ask the rhetorical question: how many housing benefit claimants with non-dependants are paying off substantial mortgages? The Government are using an index that is wholly inappropriate and unreasonable and which produces an extremely harsh effect.

Mr. Field: Is not the Minister using some Alice-in-Wonderland logic? He says that housing costs have increased by 18 per cent., but the main effect of changes in housing benefit is to cut the number of people eligible and the amount that they can claim. He turns the argument the other way when it comes to this deduction, saying that the deduction has been increased only by the amount that housing costs have increased. At the same time, he is reducing the amount of money for housing benefit.

Mr. Meacher: My hon. Friend is on to a good point. The Government are trying to have it both ways.

Mr. Newton: While we are talking about people trying to have it both ways, will the hon. Gentleman or the hon. Member for Birkenhead (Mr. Field) give me a reasonably straight and simple answer to the question whether they would apply similar logic to the non-householder housing addition, and whether they would have increased it by less than 18 per cent.?

Mr. Meacher: We are talking about this non-dependant deduction, which has been increased substantially over a short period.
Under the heavily camouflaged title of the Housing Benefit (Miscellaneous Amendment) Regulations 1985, the Government have chopped benefit on the assumption that a working 18-year-old who lives at home with his parents contributes £7·80 a week to rent and £2·60 a week to rates, making a total contribution of no less than £10·40 a week. The DHSS tax benefit models suggest that, in April 1985, typical rent and rates for a married couple with two children were £16·55 a week rent and £8·65 a week rates. That means that the youngster is being asked to contribute almost half of a typical family's housing costs. How can the Minister argue that that is not excessive or unreasonable?
That is not just my view. It is also the view of the Social Security Advisory Committee, which is a quarry of anti-Government material. I hope that that will not give the Minister grounds for abolishing it, because it is an extremely important voice in the wilderness. For the moment, it is a voice coming out of prison, because we are allowed to see its reports. On the increasing of the deduction to £8·20, the SSAC said this:
We are concerned, however, that these increases have gone beyond what is fair and realistic, and that there will be circumstances in which it is not reasonable to expect the non-dependant to pay a contribution of as much as £8·20. In these conditions the householder either has to bear the increased deduction himself, as a real cut in his own income, or force the non-dependant to leave. Neither may be a realistic option in the actual circumstances of the family, and may indeed work against other aims of social policy, such as the cohesion of the family unit and the better exercise of control by parents over young people. Many representations to us pointed out that if the non-dependant were encouraged to leave home as a result of these changes, the social security costs could well be higher in the long run. It is not possible to quantify this suggested consequence of the proposed changes, but those concerned with dealing with homeless young people report to us that quarrels over finance are a significant cause of young people leaving the parental home.
That is a comprehensive indictment of the Government's policy of rapidly increasing the non-dependant deduction. The rise for 18 to 20-year-olds from the pre-April 1983 period, when it was £3·15 a week, to the time of today's order is no less than 230 per cent., while in the same period inflation was of the order of 10 per cent. As the Social Security Advisory Committee, the Government's own advisory committee, concluded,
this increase in two years bears no relatiion either to inflation, to increases in earnings or to increases in housing costs.
In my view, it is simply a way of hammering young people, which seems to be quite an obsession of the Government in many of their policies.
There seems to be a inconsistency, to put it mildly, in the Government's approach to young people. On the one hand, they encourage them to live at home with their parents, for example, by imposing the two, four and eight-week rule on the under-26-year-olds in board and lodging, by proposing a lower rate of income support for the under-25-year-olds in the Green Paper. On the other hand, by

imposing very high levels of non-dependant deductions, they make it increasingly difficult for them to do so if their parents are on a low income. Either way, I believe that the deductions bear harshly on young people.
On the main Social Security Benefits Up-rating Order 1985, I wish to make one major point. It is an extremely important one, I think, which has so far been missed. The two-stage change in the future uprating time scale, to which the Minister referred, from an annual cycle based on November to July 1986 and then to April 1987, has so far been seen, at least by Opposition Members, as a device paving the way for a handout of goodies in the electoral run-up period, as we imagine, in the middle of 1987.
There is another perhaps much more serious issue which I think has not been noted. Under the guise of what is purely an administrative procedure, the Government will cut benefit of nearly 7·5 million single pensioners and nearly 2 million pensioner couples by about £25 million a week. By bringing forward the date on which pensioners get their yearly rise from November 1986 to July 1986, the Government almost certainly will be giving them less, not more. This is because the retail price index has already risen by 4·5 per cent. between January and May 1985. There is nothing unusual about that—it is the normal seasonal sharp rise in prices at the start of the year. If the annual rise in the retail price index turns out to be 4·5 per cent. or thereabouts for the period January 1985 to January 1986—that is certainly the Government's intention and the Chancellor's repeated forecast—it means that pensioners will get nothing, or nearly nothing, because the retail price index will show a nil increase over the period May 1985 to January 1986. That is the period on which the next uprating will be based. I imagine that the Government have noticed that point. I do not think that anyone else has, and in my view it is an important point.
If, on the other hand, the Government left things alone and uprated pensioners' benefits in November 1986, as has been done on a bi-partisan basis over the past 11 years, pensioners might expect to get an increase of around £1·75 a week if they are single and £2·75 a week for a couple. That is the extent to which I believe pensioners will lose by this apparently innocuous bringing forward of the uprating period from November to July.

Mr. Newton: I am interested in the point which the hon. Gentleman makes. It is obvious that any uprating mechanism, over whatever periods are used, related to the rate of inflation will mean that the uprating figures will be affected by changes in the rate of inflation.
Has the hon. Gentleman considered the point that, had we used the Labour Government's uprating formula of operating on forecasts rather than historic figures, it is likely that the uprating in pensioners for which the orders provide in November would be significantly lower than on his analysis? He is really saying no more than that he thinks that the rate of inflation will drop, a comment for which I am grateful in a wider context. If that is the case, the old forecasting method which the Labour Government applied would have produced much lower increases in pensions this November than those contained in the uprating order.

Mr. Meacher: The Minister, perhaps not surprisingly, evades entirely the point that I am making. If I may answer his specific point, it matters not whether one uses the forecasting method or the past record method as long as


one is consistent in keeping it year by year, because there are swings and roundabouts. Given that there is an under-expectation of inflation, losses are made up next time around so long as one maintains the 12-month periods. What we are discussing for the first time is the reduction of a 12-month assessment period for the uprating to an eight-month period. That will have significant effects on the next uprating. There will be a once-and-for-all signifaicant loss by pensioners. The Government had better take that point on board, and consider whether they still wish to go ahead with an uprating period which is likely to give pensioners zilch next time.

Mr. Newton: It would obviously be wrong—indeed, I am sure that the hon. Gentleman would not wish—to raise unnecessary and misleading fears. The Government have made it clear that the upratings, at whatever time they are carried out—the one we are carrying out with these orders for next November, the one which we propose for July 1986 and the one which we propose for April 1987, and thereafter annually in April—will continue to be based on the historic measurement of the rise in prices. There can be no question but that pensioners will be protected against any rise in prices which takes place. The point at issue is to what extent that rise in prices has occurred in, and is therefore taken into account for, any particular uprating.

Mr. Meacher: The Minister is not answering my point. If there were a 12-month period, what he says would be absolutely correct and, if only the Government would continue to do that, there would be no issue. My point is that the switch from a 12-month to an eight-month period can produce very different results. I am not commenting on whether this is a deliberate device to cheat pensioners of the uprating which they might otherwise get if one kept to the 12-month period. I am saying that it looks as though that will be the result. We all have to take a view on why that is being done. I am not trying to raise fears but, if I am correct that most of the inflation is bunched at the beginning of the year, and one takes the period thereafter as the basis for the assessment period, what I said seems to follow. That will be a substantial disadvantage to 10 million pensioners. The matter should be reconsidered carefully.
Our main contention on this mass of orders is that, behind the genial facade of the uprating, there lurks a series of pitfalls. Wherever the Government are not bound hand and foot by statutory requirement, it seems to some of us that no end of ingenuity has gone into ways of introducing fresh cuts. To give one example, the Minister said that the Government are putting in £26 million. If the Minister refers to Hansard of 15 July this year at columns 63 and 64, he will see that the figure is £23 million, but we will not quarrel about £3 million. If he is putting that amount into improving family income supplement and increasing the housing benefit and child needs allowance, that is fine, but it is dwarfed by the £175 million cut in child benefit. As I said, about 13 per cent. of that cut is being used to assist families in greatest need.
To give another example, the Government are spending an extra £1 million a year, as the Minister mentioned, in extending the lower rate heating addition into sick or disabled person's supplementary benefit. At the same time, they are ending the central heating addition for new claimants which, according to the Government's figures,

given on 2 July, will save £55 million by 1988. The word "save", as always, is a euphemism. We are talking about cutting benefits to claimants.
Thirdly, the Government have presented the change in the earnings rule for the wives of invalidity and retirement pensioners as an equal treatment measure between men and women—and indeed it is, to a certain extent. But as in the case of the changes in the immigration rules. it is a levelling down between the sexes rather than a levelling up. It involves cuts in benefit which, according to the Government's figures, will amount to £20 million in 1987–88.
There is to be a change in the housing benefit rates taper which will lead to cuts for more than 2 million households, including 500,000 who will lose entitlement to rate rebates altogether. For that and the big increase in the nondependent deductions, there is not even any compensating improvement in benefit for the most needy.
While we welcome those parts of the package that will restore protection against inflation, the package is pitted with hidden cuts. I have mentioned only a few tonight. If it is a preview, as I believe it is, of the Green Paper scenario, all that I can promise the Government is that they are in for a long, hot autumn.

Sir Brandon Rhys Williams: I do not want to speak at great length, although the House is not too full, and one might be excused for taking the opportunity to dilate on some of the very important things that underline the decisions contained in these regulations.
I would like, first, to congratulate my right hon. Friend the Secretary of State on something of the greatest importance—the renewing of the Conservative party's commitment to child benefit as the keystone of the family support system.

Mr. Meacher: What?

Sir Brandon Rhys Williams: The hon. Gentleman may be surprised by what I have said, but he must be as aware as I am that there is a body of people inside and outside the House who need to be reminded again of the strength of the arguments in favour of child benefit being paid as a universal benefit, rasher than targeting assistance to people who might appear to be in the greatest need.
For the most part, the people who have not given the subject of the redistribution of income a great deal of attention feel that child benefit paid universally is somehow wasteful and that it would be better for the money paid to be concentrated on those who come forward through case work and can establish that they have a great immediate need.
However that may be, I should like to congratulate my right hon. Friend on the resolute way in which he has presented the case and won the argument in favour of the continuation of universal child benefit. It is a very important matter and an absolutely right decision. He should be congratulated especially by me, because I have taken an active interest in this subject for a very long time. I am delighted with the way in which he has taken up the cause and convinced the party.
I should like, however, somewhat sadly, to comment on the failure to uprate child benefit this year in line with the movement of the economy. Seeing the hon. Member for Birkenhead (Mr. Field) in his place reminds me that


on 23 April 1980 he and another hon. Member, who unfortunately is not here tonight, were kind enough to support me when I sought the leave of the House to introduce a 10 minute Bill called the Child Benefit Uprating Bill. The House did not seek to divide and I was given leave to introduce my Bill.
I do not wish to detain the House too long, but the matter is so apposite to what we are discussing now that I would like to read out the brief explanatory memorandum. It states:
Child benefit was introduced in 1977 to amalgamate in a single payment the family allowance, which was paid from 1946 to 1977, and the child tax allowance, which was introduced in 1799 by William Pitt and was finally phased out for almost all children resident in Britain in 1979.
The objects of the Bill are to raise the amount of child benefit to a figure at which its purchasing power will be broadly equivalent for standard rate taxpayers to the combined value of the two earlier forms of provision for children at the time when the family allowance was first introduced in 1946; and to ensure that its purchasing power does not again fall more than 5 per cent. below that value.
The Bill accordingly stipulates that the rate to be paid shall be raised from November 1980 to not less than £5 per week and that adjustments shall subsequently be made not less than once a year to keep the purchasing power of the benefit in line with retail prices.
In proposing the necessary adjustments to the rate of benefit to be paid from time to time the Secretary of State is required to take account of factors in the composition of the Retail Prices Index which affect its relevance to the particular needs of children.
I do not think that it was a bad Bill. I have not sought to calculate what the figure of £5 in November 1980 would need to be today, but I am sure that it would be more than the uprating to £7 which the House is now considering. If I introduced such a Bill again, I do not think that I would rely for the uprating on the retail prices index. The right index should be the yield of personal taxation, because that is the direct way of assessing the movement of the economy and what the economy is able to bear in the redistribution of income.
I want to make one elementary point. Child benefit is not part of Government expenditure. The Government do not spend the money—it is spent by the parents, usually the mother, of the child. The Government act as agent in the redistribution of income. They take money from people through tax and hand it back through benefits. That is the Government's special function as originally envisaged in the national insurance scheme, which was outside the Treasury in its early days. I am sure that the Treasury did not like that, and it has now more or less absorbed it completely into the Budget. However, the original concept of national insurance was that money was paid in by people at the times when they were able to contribute and drawn out by the same people at the times when they needed it—for example, in the form of pensions, unemployment relief and sickness benefit.
During the life cycle of a citizen, there are times when he puts money into the system and other times when he draws it out. We all welcome the fact that pensioners are entitled to draw money out. However, there is a strange reticence about children drawing out money. Yet they are also citizens and during their life cycle we hope that they will make a valuable contribution to the economy. At times they will be putting much more in than they are

taking out. Surely during the life of a child we are considering the time when society should ensure that the child has enough income so that it is properly brought up.
The precise amount of contribution at any one time in the life cycle of a citizen, and the precise amount of benefit that a citizen can take out, are choices for the Government of the day. There is no absolutely right level of benefit or absolutely right level of contribution that one could look at like tablets of stone from Sinai. The Government must make the choice, and they are doing so now.
The right course is to interpret the popular will. What do people want to contribute to national insurance or income tax? what do they think should go back to different categories such as children and pensioners? What should the upratings be so that the Government keep in line with popular feeling while at the same time making the necessary adjustments to adapt to the movement of the economy?
The Government must interpret the popular will, and it is my humble submission that on this occasion my right hon. Friends have it wrong. The public would have preferred child benefit to be increased fully in line with the movement of the economy rather than by the smaller amount to the round figure chosen by my right hon. and hon. Friends. It is a matter on which it is not possible for anyone to pontificate, but I feel that a mistake has been made. I hope that that will be rectified in future years.
Of course, other aspects of the Department's budget must be considered. Within the whole of the outgoings of the Department, a great number of choices must be made, and I know how painful they are for my right hon. and hon. Friends. The House appreciates the attention that Ministers give to getting these matters as right as they can with the resources they have.
Should they have done more this year about raising the selective benefits, which are a sort of emergency service outside the conventional pattern of the redistribution of income, or would it have been better to target their money to the universal benefits? They have chosen the selective benefits and, no doubt, that money will be well spent and competently administered within the limits of the system's capacity to cope with the problems that we have.
However, the selective benefits are not being increased in real terms by the full amount of the cut in child benefit. Thus, the decision to concentrate on the selective benefits does not absorb the full amount of the money that will not be put out in the form of child benefit. We are changing the life-cycle pattern of the average citizen.
What will be the real effect of this decision? It represents a shift from families to childless people in terms of their spending power. Is that a social objective of the Government? I believe that it is not, but that it is an incidental effect that has not been thought through. Although it was not desired initially, it is, nevertheless, a real effect.
When childless people complain that they do not see why they should be made to contribute to other people who choose to have families and bring up children—who say that it is a matter for them if they want to have children—they are neglecting the fact that somebody brought them up when they themselves were children: somebody made a contribution to their upbringing.
When childless people complain that they are asked to pay, by means of tax or national insurance contributions, for the families of other citizens, I feel disposed to ask them, "Who are you bringing up in compensation for the


fact that you, in your turn, were brought up by somebody else?" Each generation takes something from the previous one and passes it on to the next, and we all make the contributions that we can or that we feel able to give. I am not sure that I would have chosen childless people as those who should be beneficiaries of the change in Government policy on the redistribution of income.
We also see here a shift from women to men. We recall the debates that we had about abolishing the child tax allowances and amalgamating them with the old family allowance. Family allowances were conventionally drawn by the mother and the child tax allowance was an aspect of the make-up of the pay packet of the man. We had debates, some of them not entirely creditable, in which some Members argued that the wallet was more important than the handbag. The decision was taken; but now the Government are, to some extent, reversing it. I do not regard that as being in accordance with the spirit of the times and I hope that further thought will be given to that aspect of the matter.
From the administrative point of view, we are seeing more emphasis on individual casework and less reliance on automatic computer credits. The child benefit is an automatic credit. It is a benefit which enjoys an extremely high rate of take-up. There is no humiliation to people in drawing the universal child benefit; but there is inevitably a degree of reluctance on the part of citizens—an element of humiliation and elements of distaste—in drawing a benefit which relies on proof of need through casework.
From answers to parliamentary questions I elicited the fact not long ago that, in the administration of national insurance and supplementary benefit, the Department is required to make more than 90 million manual entries every week. That is the administrative burden that is now carried by the loyal and wonderfully reliable and long-suffering staff of the Department of Health and Social Security. In that the Government are relying increasingly on casework and less on the use of computer and automatic benefits, they are adding to the millions of entries that must be made, and that is a mistake.
We have many times debated the whole subject of selective and universal benefits. One must remember, because the logic of the argument leaves one with no choice, that if the Government rely on universal benefits, they unite the nation and eliminate administrative work. But if they rely on means-tested benefits, they introduce into the redistribution of income two highly undesirable elements.
A large number of people learn the hard way that there is no purpose in thrift because they must run their savings down—I appreciate that there is an allowance, that it is not ungenerous and that it is being increased—before being eligible for benefit. If they save a large sum of money, they rule themselves out of benefit. That must for many people be an argument against thrift.
More than 8 million people in Britain today are dependent on supplementary benefit. That means that 8 million people are learning the hard way that an aspect which is central to the tenets of the policy of the present Government—which is widely supported and which is part of the British tradition of common sense, namely, the importance of self-reliance and thrift—does not apply to them.
Further, they are not always the same 8 million people whom we carry with us as second-rate citizens. People go

in and out of reliance on supplementary benefit from time to time, so that between one election and another the number of people who have learnt that what the Government say about the importance of thrift does not apply to them may be as many as 10 million, or even more.
There is also the problem of the disincentive to work, which the Government are seeking to diminish by their brilliant suggestions for the reform of the redistribution of income. However, when all is said and done, if we rely on giving benefit only to those on very low incomes and withdraw their capacity to draw benefit as they increase their incomes, we undermine their incentive to work. We can dress that up in different ways and try various methods to encourage them to work, notwithstanding the logic of that underlying fact. Nevertheless, selective benefits undermine the will to work, and that is a fundamental argument against them.
In spite of what I have said, I congratulate the Government on their decision that universal child benefit shall remain the keystone of our family support. Christian democrats in all parts of the House can rejoice in that.
I have one suggestion, which I hope the Minister will consider to be constructive. Because a number of people feel that it is wrong for them to draw child benefit because they do not strictly need it, the Government may consider the possibility—I have mentioned it in the House before—that such people could be allowed to renounce the child benefit and let it remain the child's money. It could accumulate in a special account, such as a national savings account, and be indexed to cater for changes in the value of money. After reaching a particular age—say 18—the child would be entitled to a lump sum which would be the rolled-up full amount, with compound interest, of the child benefit to which that child was entitled from the start.
Many parents might think that an endowment of, say, £10,000 which had been saved for the child by that means, would be an attractive family credit. Instead of drawing the money each week, when they feel that they do not strictly need it, they could sign a form of renunciation which would allow that money to accumulate on the child's behalf until, say, the age of 18, being a form of child endownment giving a capital sum instead of a weekly allowance.
I hope that the Minister will consider that possibility. It would meet the case of people who feel a certain distaste, perhaps an unnatural shame, about drawing their child's benefit. It would give them another option.

Mr. Archy Kirkwood: I am always pleased to be able to take up the remarks of the hon. Member for Kensington (Sir B. Rhys Williams). I feel that I am better informed for listening to his speeches. Of course, I do not always agree with what he has to say, but I appreciate his experience and assiduous work on these matters. I am pleased to say that I agreed with many of his comments, especially those directed to child benefit. Perhaps his effusive congratulations to the Government on the way in which they have maintained child benefit as the keystone of their policy when they have failed to increase the benefit sufficiently to keep it in line with inflation could be described as incongruous, but I agreed with the majority of his speech and he advanced his case extremely well.
Last weekend I canvassed the views of the man in the street, as it were, in my constituency. I included especially the elderly. I sought my constituents' views on the upratings that we are now discussing.

Mr. Field: The anti-women industry.

Mr. Kirkwood: I stand corrected. I carried out my canvass in what might be described as small Scottish rural towns and I accept that it might not have produced an average and typical sample. However, it appears that there is a wide gulf between their perception of the opportunities and standard of living that are available to them and that of the Government. I deployed to the best of my ability the case that the Government are presenting, which it is possible to do statistically. The reaction of those to whom I spoke was to ask, "What about the top salary pay review and the awards? It is all very well to say that £2,000 million has been spent on the uprating but what about the Secretary to the Cabinet, whose salary is to be increased from £50,000 to £75,000 per annum?"
Retired people, especially those on small occupational pensions, complained bitterly that their pension income is taxed. They stressed that they have been waiting for a long time for the Government to change the earnings rule. The Government have promised that they will do so as soon as they feel that they can afford to change the rule but they have been promising change for a long time. Other complaints were directed to dental charges, the service provided by opticians and the limited list of drugs available to doctors for prescriptions, although some of the complaints about the list have been met. However, there remains a great deal of heartache, confusion and concern in the high street of Hawick and other places in my constituency.
One can say until one is blue in the face that the uprating reflects the movement of the retail price index but the response of the average person is to argue that a 1 per cent. increase in the RPI is not reflected exactly in price increases in the shops and that a tin of corned beef which costs 65p moves up to 75p in the space of a week although the RPI has reflected only a 1 per cent. movement. One lady told me that she had calculated that her shopping costs over the past two years had escalated by 33·3 per cent.
Many of my constituents cannot understand why they are faced with standing charges for their gas, electricity and telephones. They read in their newspapers that the fuel industries are, by and large, making huge profits in terms of money, which they understand, yet sometimes standing charges amount to as much as the units that they have consumed. The Government are doing nothing to reduce standing charges and in some instances are imposing levies on the fuel industries which bear adversely on some of the poorest in our society. The argument applies to television licences, but to a lesser extent. There is concern also about the death grant, and the Government's proposals would serve only to make the position worse. I received complaints also about the Government's failure to increase the Christmas bonus to a proper level in line with inflation.
It seems that there is a wide gulf of misunderstanding. If the Government have a better case to put to the public, I suggest strongly that they get out into the highways and byways and present it to the people. They should make a better job of their PR if they think that they can do so.
There is a gap between those receiving benefits and pensions, which are based on the retail price index, and increases in average earnings, which are based on another scale. How is the discrepancy to be approached in future? Do the Government recognise the justice or the merit in increasing benefits and pensions in excess of what is statutorily required to try to redress the balance? If they say that they are not prepared to accept that recommendation of the Social Security Advisory Committee, it is inevitable that pensioners and those in receipt of benefits will fall further and further behind wage earners.
I agree with the hon. Member for Kensington that there is a shift in Government policy in favour of childless couples. If that is the fact, it should be stated explicitly and debated. Like the hon. Gentleman, I feel that it is the wrong way in which to move. The move to diminish the importance of child benefit to the extent of £175 million discriminates actively and positively against women, which is deeply to be regretted. Some of the pressure groups feel that the process of consultation that the Green Paper is supposed to stimulate is being stymied and fudged by some of the changes that the Government propose or which have been made, especially in relation to child benefit.
The Government might have been able to persuade me that the cut in child benefit was defensible if they were able to be more convincing in the provision that they have made for other benefits, especially family income supplement. I might have been persuaded by the Government's case if the cut in child benefit of £175 million had been diverted to the family income supplement mechanism, or to a far larger extent. The Minister has said that £26 million has been ploughed back into FIS as opposed to the £175 million that has been removed from child benefit. Unfortunately, the proposals for FIS do not go anything like far enough to enable me to support the cut in child benefit. The Child Poverty Action Group suggests that if the Government are determined to proceed with the £175 million cut, they should consider introducing a child benefit premium for low income families. That suggestion should certainly be considered during the consultation period.
The CPAG has argued—it has persuaded me—that the FIS system reaches only a small minority of low income working households with children. Its briefing paper states:
The analysis of low incomes in Vol. 3 of the Green Paper shows that about 700,000 families with children headed by a wage-earner were in the bottom fifth of incomes (the definition of low income used) in 1982. The number is likely to be even higher today. FIS is currently received by only about 200,000 families (and was received by only 158,000 in 1982). Similarly, DHSS figures show that, in 1981, over one-and-three-quarter million children were being raised in working families living in poverty or on its margins (up to 40 per cent. above SB level). FIS is currently received on behalf of only 417,000 children.
There is evidence that FIS does not go far enough, and the Government have missed an opportunity to extend that cover.
Child benefit is an important part of the budget of the low paid. Again, the CPAG reported the analysis of the social policy research unit at York university, and concluded:
child benefit clearly plays an important role … Low income families not in receipt of supplementary benefit received about a fifth of their net disposable incomes from child benefit, rising to about a quarter for lone parent families if one-parent benefits


is also included … These results suggest low income families would lose a substantial proportion of their income if their entitlement to child benefit was in any way reduced.
That is true. The case has been incontrovertibly made. The Government have made a mistake, and the hon. Member for Kensington was right in saying that the popular will was contrary to the Government's will. The man in the street was surprised to find the extent of the Government's proposed cut. Given the Green Paper reviews and the ongoing consultation process, the future does not augur particularly well for low-income families. The work done by the Institute for Fiscal Studies is evidence of that. It studied the impact of some of the proposals on one-parent families, and one-earner couples with a variety of family complexions, and concluded that low earners, low income families and single parent families would bear the brunt.
I am worried about the central heating addition changes. Their introduction cannot be justified. The £1 million extension to the disabled and the sick is obviously a welcome development, as all sides of the House will recognise. However, the complexity of the system that remains will cause tremendous confusion. The present dual test identifies those who are sick and disabled and who live in difficult-to-heat accommodation. Whereas previously people in that category could double up those two conditions and receive a higher rate of benefit, the proposal will remove that possibility. The Government should consider restoring the possibility of receiving the higher level of benefit, if the difficult-to-heat accommodation test is also met.
There has been considerable trouble in my constituency with the difficult-to-heat estate rates. The Government should reconsider that, and introduce proposals to allow people to apply for and claim that rate of benefit, if the central heating equipment was installed after the estate was built. I have personal experience of the tremendous difficulties that that causes.
I cannot understand why the Government have chosen 5 August to introduce the change in the central heating additions. It may be a deeply significant date. It would have been much more sensible to use the November uprating date so that we had more time to publicise the cut. As the hon. Member for Birkenhead (Mr. Field) rightly pointed out, people who do not apply between now and August will forgo the benefit, and that is unfair.
If the Government are acting in good faith on the central heating addition, during the consultation period they should spend money on a widespread campaign for take-up of benefit so that we have a true measure of the cost of benefit. It could be easily done by giving local offices the power and resources to campaign in the local press, and on local radio and television stations. That would satisfy me to a greater extent that the Government were approaching the review in a more open-minded and fair-handed way.
The staff resources of the Department must be stretched to the limit by the proposals for next year. The concertinaed process of the upratings, on top of the development work on some of the changes, especially in housing benefit, will put an intolerable pressure on some of the front line staff. I do not mean the mandarins in Whitehall but people such as those in my local integrated office. By and large they do a good job in impossible circumstances. I hope that the Government are considering them, as well as policy points and other problems.
It would be churlish not to recognise that the Minister's announcement on board and lodgings allowances for residential increases in nursing homes must be warmly welcomed. The Minister responded quickly, and I certainly did not expect the announcement so soon. It shows that he has been paying attention to what has been going on. The increases will be warmly welcomed, and that is a good point on which to end.

Mr. Frank Field: I was intrigued to hear that the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) spent last weekend meandering through his constituency, and setting on unsuspecting constituents to ask their views. He shows a political talent which most of us lack. Perhaps he was more aware than the Government Whips of how close Wednesday's vote would be and how near the possibility of a general election we were. His local paper will undoubtedly pick up his diligence in gaining constituents' views.
I was also interested to learn that the hon. Gentleman discovered his constituents' concern about the Top Salaries Review Body award. It is interesting that in the early hours of Wednesday morning, when we discussed top people's pay, the Chamber was so crowded that hon. Members were almost swinging from the balconies, and that today, when we discuss bottom people's pay, far fewer hon. Members are present in the Chamber. I cannot quite understand why.
I am sorry that the hon. Member for Kensington (Sir 13. Rhys Williams) has left the Chamber, because I wish to comment on some of his remarks. He has obviously taken comments on the need to consult constituents to heart. At this moment he is probably tearing back to Kensington to hear his constituents' views. He skilfully plunged the stiletto knife into the Government by gently congratulating them on their child benefit decisions. He was really saying—if he were not such a gentleman he would have put it in my terms—that if we did not have a Government whose protection of the family was so awful, we would be debating, not cuts in child benefit but increases, and we congratulate the Government only on the new status quo that they are creating because the position could have been much worse. Child benefit could have been means-tested. The Government could have paid attention to their supporters and abolished it completely. It is appropriate that the hon. Member for Kensington should comment on child benefit, because for a long time he was the lone voice trying to educate the House and the country about its importance.
The change of view on child benefit and family support owes a great deal to the work of the hon. Member for Kensington. Back Benchers can be influential if they stick through thick and thin to a few topics. I welcome the hon. Gentleman back to the Chamber. It is appropriate that I said the nice things about him while he was out of the Chamber. I can now refer to some points of disagreement.
I hope that the hon. Gentleman, who is the main champion of child benefit in this House, will not again end his speech in the way that he did this evening, by saying that some parents feel a certain amount of guilt about drawing child benefit. If guilt exists, it has to be challenged, because it is a benefit that goes to all families as of right. I hope that we would not limit any reform to those parents who at any time feel that they are so hell off that they do not need to claim child benefit.
I hope that the next Labour Government—we all live in hope—will be far more radical and follow the path of the New Zealand Government, and not only in regard to the abolition of tax benefits. For a considerable time the New Zealand Government have allowed mothers to choose whether they wish to capitalise part of their child benefit payments. If we are serious about extending home ownership and the ownership of capital goods in the community, this House and the electorate should think seriously about giving people the chance to have a capital sum in lieu of child benefit payments, rather than adopting the much more modest proposal made by the hon. Gentleman. He seemed to suggest that some people feel some guilt about claiming child benefit and that they should be allowed to build up a capital sum for their children. I should much prefer that capitalisation to occur for the family now, rather than that children of well-to-do families should pick up the value of child benefit at 18, or whatever age was chosen.
I should like now to refer to the comments of the Minister for Social Security in his opening speech. Opposition Members were trying to establish that there has been a major change in attitude towards child benefit on the part of the Government, whereas the Minister was claiming that nothing of the kind had occurred. He was saying that at each review the Government have to make a judgment about whether to increase child benefit. That is a major change from the position that was outlined before the uprating statement.
I need to take the House back to the time of the last Labour Government. They were wrongly maligned on many issues but rightly on their initial attitude to child benefit. The House will remember that the Labour party gave an election pledge to introduce child benefit by merging the family allowance system and child tax allowances. Then some northern Members talked over the weekend to their constituents—I warn the hon. Member for Roxburgh and Berwickshire that it is dangerous to talk too much to one's constituents—who were horrified to find that the Government were proposing a reform which would transfer income from men to women. The Government panicked. Initially they said that the scheme would not be introduced but, as a result of the leaking of Cabinet papers, they were forced to introduce the scheme.
The then official Opposition rightly exploited the embarrassment of the then Labour Government. One of the means of exploiting that embarrassment was the tabling of early-day motions. Early-day motion 420 was tabled on 12 July 1977. One of the signatories to an amendment to that motion was the present Minister for Social Security. It called on Her Majesty's Government
to ensure that increases in child benefit are treated in the same way as tax cuts, so that … there can be an improvement in the real value of child benefit as part of an overall reduction in the burden of direct taxation and a shift to indirect taxation".
I emphasise that the operative words talked about 
an improvement in the real value of child benefit
and not the cut with which we are faced today. The signatories also wished to see
a shift in indirect taxation".
My hon. Friend the Member for Pontypridd (Mr. John) received a letter from the Prime Minister during the general election campaign of 1983, and her reference in

that letter to child benefit came in two parts. They are important and relevant to our debate. First, the Prime Minister said:
Child support has also been fully protected under the Conservative Government; allowing for the new rate announced at the time of the Budget, which came into payment this November, there has been an increase since April 1979 of over 62 per cent. in the level of child benefit. This would put Child Benefit at its highest ever real value.
It was absolutely correct and right for the Government to make that claim. If tonight's orders are passed, the Prime Minister will not be able to make that case to any hon. Member or to any constituent, because we are now talking about cuts in child benefit.
In her letter, the Prime Minister rightly went on to refer to the achievements of her Government when she said:
The importance the Government attaches to Child Benefits was made clear by the Chancellor of the Exchequer in his Budget speech in March this year, when he said: 'It is important for families and particularly for the low paid. Indeed it is the benefit which provides the greatest help for many of the poorest families in the country'''.
I emphasise the crucial importance of the statement about the importance of child benefit for families and for the low paid, and that it is of the greatest help to many of the poorest families in the country. Her letter illustrates the significance of the change that we are debating tonight.
Until the introduction of the order, the Government could claim that the Conservative party was the party of the family. The Government will not be able to make that claim in the next general election because tonight, for the first time under this Government, we are seeing a reversal of the policy of clear commitment to view increases in child benefit in the same way as reductions in taxation. Before the order, there was no talk of increasing FIS or of introducing a new social credit. The Government maintained that the benefit was crucial to all families and to all women, and of particular importance to the low paid.
I should like now to refer to the points made by the hon. Members for Roxburgh and Berwickshire and for Kensington. We know that the Government will save£175 million from the cut in child benefit. We were fobbed off by the Minister for Social Security when we intervened in his speech. We have a right to ask him whether the Government will give us an assurance that the whole £175 million will go into the new social credit. The Government cannot claim that the cut is being made as a means of targeting help on the poorest families unless that assurance is forthcoming. The hon. Member for Kensington said—he has a delicate way of putting a stiletto into the Government's side—that if we do not get that commitment, the Government will be using much, if not most, of the saving not to help poor families but to help finance tax cuts for all taxpayers, the majority of taxpayers being those without children. Therefore, we shall be seeing a redistribution from families to single people.
I end, as the hon. Member for Kensington ended, by reminding the Government—because I am less gentle than the hon. Gentleman in thinking that the Government do not need to be re-educated about the importance of child benefit—that it is not only a way of maintaining tax equity between people with children and those without children. We must all reiterate the new argument advanced by the hon. Member for Kensington that it also ensures that thrift is not penalised because there is nothing in the rules of paying child benefit which will penalise those who save and those who have capital. It also concentrates help on the very poorest people in the sense that child benefit


is a larger part of their incomes than it is of the incomes of other families. It is the best way of tackling the incentive to work problem and, as both the hon. Member for Kensington and the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) reminded the House, it is the most effective way of transferring resources to women.
I hope that the Under-Secretary will be more forthcoming about this issue than the Minister has been. The Opposition are putting forward the view that there has been a fundamental shift in Government policy from a commitment without qualification to child benefit to a limited commitment to it. That has profound repercussions, in the way that other hon. Members have described.
I want also to comment on two other issues raised in the orders. The first relates to central heating additions and the second to the changes in housing benefit.
The Government must be given credit. They are highly skilled in presenting these changes. If private industry paid attention to our debates, it would set head hunters to work to discover who it was in the DHSS who had this extraordinary skill of presenting quite significant cuts as a way of providing extra help for the poorest of our fellow citizens.
We see it in the heating additions. The Government say that they are making an automatic benefit for the sick, the disabled and the blind who are on the long-term rate of supplementary benefit and do not have to register for work. The Government say that they will get the benefit automatically. At the same time, after 5 August, the Government are to abolish the heating addition for central heating.
It is a clever move. From the answers to parliamentary questions by the Under-Secretary, we discover that the automatic benefits will cost £1 million in a full year but that the cuts in central heating additions will total £55 million. The message goes out to our constituents that, on average, 510 of them will lose this benefit unless they claim before 5 August. We have 10 days in which to tell large numbers of people who currently are eligible for central heating additions that they should claim.
I tremble for the future of our social security system when I consider the reason that the Government put forward for the cuts. It is that they are alarmed at the numbers of people claiming. It has been a success. The Government have targeted help to it. Our constituents have claimed. Then the Government say that so many people are claiming it that it had better be withdrawn quickly. It means that we are caught in the Government's own benefit trap.
Benefits are secure under this Government only if large numbers of our constituents do not claim them. Once they start to claim, the chances are that the Government will suggest that the expenditure is getting out of control and that cuts must be made.
I congratulate the Government on the cleverness of that DHSS official who has managed to present yet another important cut as an increase in benefit rights for some of our poorest constituents.
As for the changes in housing benefits, even the cleverness of that official in the DHSS has not been able to disguise the extent of the cuts both in the rates taper and, as my hon. Friend the Member for Oldham, West (Mr. Meacher) said, in the changes in the non-dependant deductions.
Under these changes, overall about 2 million claimants will lose some benefit, 460,000 will lose all help with their rates and an additional 340,000 will lose all housing benefit. It means that about 800 of the constituents of each hon. Member will lose all help with their rate payments, about 550 will lose all help with housing benefit and, in total, between 3,500 and 3,600 of our constituents will suffer cuts in their living standards as a result of this move to change the rates taper. If that is not enough, we see further cuts in these very important changes in the non-dependant deductions that many poorer households will face.
The Government make these proposals without any real understanding of the tension caused in low-income families. Many mothers know what a strain it is to bring up children in a poor household. There is a sense of continual failure that they have never managed to give their children what other children have. They are anxious that when their children cease schooling and, if they are lucky enough, find jobs or draw benefit, they have money in their own right with which to buy clothes, just as their peers at school or at work have always had. For the Government to say that, at the point where there is extra income coming into a household, for the first time they will claw it back shows a real lack of imagination. If it is not a lack of imagination, it demonstrates a degree of cruelty which even this Government have not shown until now.
There is much in the orders that the Opposition welcome. There are the changes for disabled people which all hon. Members will welcome. There are the changes for our very sick constituents in nursing homes. That is especially welcome and it is a very generous move on the part of the Government. However, necessarily I have concentrated on the cuts in the heating additions and above all in child benefit. There has been a sea change. Until this order, the Government could claim that they had a good record in being the party of the family. They made much of that. In 1979, the Government claimed to be that party. In 1983, they rightly claimed that their record justified that assertion. They will not be able to go into the next general election with that claim intact.

Mrs. Margaret Beckett: We have had an interesting and wide-ranging debate. I shall endeavour not to cover the same ground so ably covered already by those hon. Members who have contributed.
I begin where my hon. Friend the Member for Oldham, West (Mr. Meacher) left off. We were talking about the change in the uprating date, and my hon. Friend said that this might have unfortunate implications, for example, for pensioners, and he wondered whether this was a way for the Government to save money or just what their intention was.
I have a nastier mind than my hon. Friend the Member for Oldham, West. I wonder whether the Government have in mind that, because the inflation figures will be rather lower than normal when these changes are being considered, they will be able to tell pensioners that they are not entitled to anything because inflation has been kept low and there is little need to give them very much. However, they will add that, out of the generosity of their heart, they intend to put in an extra 1 or 2 per cent. over and above the rate of inflation. That is much more in line not only with what my hon. Friend the Member for


Birkenhead (Mr. Field), with his customary charity described as skill but with the boldness, if not the barefaced cheek, that the Government usually show in advocating their policies. It would also be much more in line with the Government giving pensioners an increase similar to that which they would normally receive at the date of the usual uprating and claiming credit for it being over and above the rate of inflation, and with the election-winning strategy that the Government are attempting to pursue.
Hon. Members have spoken about the Government's change of policy towards child benefit and family income supplement and the way that that represents a shift away from assistance for families. I listened, as always, with interest and admiration to the remarks of the hon. Member for Kensington (Sir B. Rhys Williams). I do not always have the same degree of admiration when I listen to those who say how hard it is for them to bring themselves to claim child benefit, especially, as is sometimes the case in the House, when those same people use the fact that they hate claiming child benefit as a justification for its ceasing to be a universal benefit. The result would be that hon. Members and a whole range of other people who are not so well paid would lose the advantage of child benefit.
The hon. Gentleman said that there might be some way in which people could change the use of child benefit. My hon. Friend the Member for Birkenhead made some suggestions. I have never understood why those people who so dislike child benefit do not make a convenant and transfer the money to a charity or a group of poor people about whom they are worried. I trust that the next time a change in the universal nature of child benefit is advocated those people who say that they should not be drawing it will have seen that it has gone to those in greater need.

Sir Brandon Rhys Williams: I should not like to say that I disagree with the hon. Lady's attitude, because I believe that there is a good deal of humbug amongst those people who are well off enough to raise a child without this form of tax cut. Child benefit is a tax cut. A benefit and a tax cut are the same. In suggesting that a way should be found to turn the benefit into capital for the child, I am seeking also to emphasise that the money is the child's and not that of the parents. The parents should not think that they are drawing it for themselves. They draw it because they have a responsibility for the child, and they should spend it on the child. In those cases—not many—where mothers are blamed for not spending it on the child, it should be drawn to their notice that that is the purpose of child benefit.

Mrs. Beckett: I take the hon. Gentleman's point. I do not altogether disagree with him. In a sense, we accept that child benefit is a benefit for the child. The fact that those who draw it have no need of it is often used as an argument for child benefit not to be universal. I have never understood why such people do not take steps to give it to those for whom they usually express anxiety instead of seeking to reduce the scope of the benefit for those who may need it more.
Although families may benefit from the increase in family income supplement, they are liable to lose through some of the changes in child benefit and housing benefit. That means that they are not being treated as generously as the Government sometimes claim.
We wholeheartedly welcome the change being made in line with the pledge given by the Minister of State about the payment of funeral costs for people engaged in disputes, and the changes and the substantial increase in payments to those who have suffered vaccine damage.
We were sorry the other day to hear the Minister say that that change does not necessarily mean that there will be an increase each year in line with inflation, but we hope now that the Government have taken powers to make that increase that it will not be seven years before the next increase—even if it is not every year. I know that the Minister said that the changes did not preclude the introduction of a more wide-ranging scheme for those who have suffered vaccine damage and others, but we hope that that is not a sign that the Government have no plans to introduce better schemes.
The Government should draw to the attention of those who might be able to claim the central heating addition the fact that they are liable to lose it. The Government should seek out those who have wrongly suffered a voluntary unemployment deduction. The Minister will be aware that his Department has recently been absolved from the duty to make the payment to those people, but we hope, nevertheless, that the Department will consider undertaking a further campaign to draw that loss to their attention. I hope that he will give an undertaking that in the meantime the Department will not destroy the files so that there is no record of those who may be able to claim such deductions were they aware of the extent to which they have been deprived.
The Minister mentioned the regulations which we have become accustomed to call the board and lodging regulations. We welcome the improvement that the Minister has announced. It is fair to say that the Government were warned consistently, when they introduced the temporary regulations and when they introduced the present regulations, that the limits set were inadequate. We are glad that they have decided to make an increase from November and to make the limits available to those in nursing homes. It was extraordinary that people in such homes were entitled only to claim something like the attendance allowance above the limits available for residential care homes.
Although we welcome what the Minister said about residential care homes and nursing homes, there is one aspect of what he said which caused me anxiety. I hope that when the Under-Secretary replies he will answer my questions. The Minister for Social Security said that he felt that the change in the date of uprating from now until July 1986 meant too long a wait for an alteration of that magnitude which would therefore be made in November. He did not, however, announce any increase in the limit for the under-26-year-olds who are also affected by the regulations. I wonder whether the implication of what the Minister said is that we shall have to wait until July 1986 for an increase in those limits. That would be a serious matter.
We are at the beginning of the period when people in major cities, especially London, will be affected by the limits and the other changes in the board and lodging regulations. There will be increasing protest about the inadequacy of those limits, for example, in London. If we are not to see any change in those limits for a year—as may be inferred from the Minister's statement—the Government are in danger of making an already bad position a great deal worse. I shall say no more about the


structure of those regulations, on which we have strong views, because I am sure that we shall return to the subject. I am anxious to have an answer from the Minister on that point.
I welcomed what the Minister for Social Security said about the increases in other allowances, although I wondered—I shall not press the Under-Secretary on this point—whether he was implying that the meals allowance might be reviewed down. I hope that I was mistaken in drawing that inference, but we shall watch that point carefully. If that were to be the case, it would add insult to injury and greatly exacerbate what is already a difficult and, for many youngsters, a disastrous position.
I intend to deal with housing benefit and central heating additions together. My hon. Friend the Member for Birkenhead, with his usual skill, drew the Government's attention to the fact that they are acting strangely if one accepts their description of the course on which they claim to be embarked.
In terms of the entire housing benefits scheme, we have seen how the Government first substantially cut the money available for general housing subsidies by £1,300 million since 1979. They then actively encouraged increases in rents that were bound to follow by cutting such a fantastically large sum from the general housing subsidy. When those rents increases meant that many more individuals were eligible for housing benefit, the Government said that too many people were claiming it, and, having targeted spending in the first place, they used that targeting as an excuse for later cuts. We strongly suspect that we shall be seeing that on a much greater scale later.
As my hon. Friend the Member for Birkenhead pointed out, the only reasons so far advanced by the Government for making the change in central heating additions—unless the Minister comes forward with a fresh reason tonight—is precisely that too many people are claiming them. That was also the reason for the Government's proposals on board and lodging regulations. It is all very well to have such regulations, but the problem seems to arise when people are so inconsiderate as to wish to draw these benefits.
The Government have deliberately imposed extra taxes on fuel and have deliberately raised fuel costs. It is therefore extraordinary that they should be cutting heating additions. I understand that many people, particularly those who draw the higher rate additions, are unemployed. It is particularly unfortunate that, in line with the Government's general attitude to the unemployed—and their proposal that such people be on the lowest rate of income support in the scheme that will be put to us in the next parliamentary Session — they are again cutting central heating additions to the unemployed.
The Minister of State said that central heating additions used to be higher because the costs of central heating were considered to be above the costs of heating in general. It was pointed out by my right hon. Friend the Member for Glasgow, Govan (Mr. Milian) that that could well be because at this time of year many people did not have their central heating switched on. My constituency case work convinces me that my right hon. Friend is quite correct.
But let us set aside the reality of how people live and accept the Government's argument. The Minister appears to be saying that it was fine to have a central heating addition when costs were above general costs, but now that they are not so far above, or perhaps even below, general

heating costs, the money is taken away altogether instead of being switched to improve general heating additions. That is a strange argument, and it is perhaps another example of the ingenuity to which my hon. Friend the Member for Birkenhead referred when he spoke of the Government justifying the various cuts and changes that they have made.

Mr. Newton: I hope that the hon. Lady recognises that, leaving aside heating additions, the supplementary benefit rates include a basic element for heating costs. The justification for the existence of the heating addition is that the types of property involved carry with them heating costs over and above the norm. That seems to destroy the hon. Lady's argument.

Mrs. Beckett: I understand the Minister's second point, but, as I have already said, the Government's own actions have substantially raised the cost of fuel.
The Minister is always telling us that this Government feel that they have a much better record than previous Governments. If he feels that the notional element in supplementary benefit rates far heating costs is sufficient, we would be more than happy if he gave an order of magnitude as to what exactly that element is. We would then be able to judge how near that comes to meeting the fuel costs of claimants.
We should like to hear that the Government intend to keep the higher rate of addition for those who will still qualify. I understand that at present only about 4 per cent. of claimants would qualify. But those who are fortunate enough to qualify under the Government's new scheme should at least get the higher rate of addition, particularly as they could lose out if in the past they were entitled to two additions but did not claim the one that is being preserved.
The Government ought to consider extending the estate rate addition to estates in which central heating systems were installed after the estate was built rather than at the same time. That is an unquestioned loophole in the regulations, and, having made fairly substantial savings elsewhere, the Government should well be able to afford such an extension.
Over the last few years there have been substantial cuts in housing benefit—far above what could possibly be justified. In 1983, 400,000 people lost entitlement altogether, and 1·75 million lost some benefit in order to provide a cut of about £50 million. In 1984, when there was a cut of £215 million, 500,000 people lost entitlement altogether, and about 1·75 million lost at least some housing benefit entitlement. The Government are now embarking on another round of cuts of about £500 million. We can therefore expect substantial additional numbers of people to lose out.
Apart from the general cuts in the housing benefits scheme, there are specific proposals that come within the ambit of the changes that we are now discussing. Has the Minister been able to discover or invent any justification for the cut in subsidy, to local authorities to 80 per cent.? In the past, the subsidy that was received was generally of about 100 per cent. When we last discussed housing benefit, this appeared to be a wholly arbitrary figure. There seemed to be no particular reason why the rate should have been set at 80 per cent. There appeared to be no reason for saving that money. If the Government have now managed to come up with a reason, we would be interested to know of it.
Has the Minister any better reason for taking away altogether the subsidy that local authorities are receiving for administration? At present it is about 60 per cent. of costs. We were told that it would provide a greater incentive to contain costs and improve efficiency, but this is at a time when the Government intend substantially to increase the costs and difficulties faced by local authorities, as well as the number of defaults they are likely to face, by the proposal under which everyone will have to pay 20 per cent. of the rates.
We are also discussing the increases in tapers that the Government will be putting forward. I understand that over the past two years the Government have effectively doubled the rate taper. There are now to be further substantial changes. Not only will that affect hundreds of thousands, if not millions, of people, but it will save the Government substantial sums. I sometimes wonder whether the Government appreciate the effect of this on the incomes of those from whom they keep making what they regard as comparatively minor savings.
There has recently been evidence from the Low Pay Unit about the amount of household income left for those with incomes at the highest levels at which housing benefit is still paid. We understand that the Government are seeking to reduce those levels, and the Government constantly complain that housing benefit is paid too far up the income scale. But, as we constantly remind them, it is not paid to anyone who is even near average earnings unless that person's rent is above average.
Using the data from the family expenditure survey, in evidence to the Government's housing benefit review the unit pointed out that, after expenditure on essentials, such as food, fuel, clothing and housing, the kind of households that are able to draw housing benefit are left with about £2.50 to £3.50 a day. It also drew attention to the items that those sums of money have to cover: laundry, shoe repairs, transport other than to work, toilet requisites, the prescription charges that the Government have substantially increased and such minor costs as children's pocket money and toys. Nevertheless, these are very important items of expenditure, particularly for poorer families. Therefore, it is unwise for the Government to continue cutting away at housing benefit, thinking only of the public expenditure consequences and not appreciating the effects that the cuts are having upon the standard of living of so many families.
This is applicable in particular to non-dependant deductions. My hon. Friends have made most of the points that I would otherwise have made, but I think that we ought also mildly to rebuke the Under-Secretary of State for his statement on 27 June that nobody on supplementary benefit would be affected by the Government's proposed changes to housing benefit. The Minister for Social Security said that it is unusual to announce the increases in non-dependant deductions with the upratings, so perhaps they had slipped the mind of the Under-Secretary of State. However, they certainly affect those on supplementary benefit and from that point of view alone ought perhaps to have been drawn to our attention.
The Minister for Social Security said that the index which has been consistently used for non-dependant deductions is 18 per cent. He implied that this increase has been used for many years. Will the Under-Secretary of State tell us whether the major increase in non-dependant

deductions in April 1984 — an increase which was roundly condemned as wholly unreasonable by the Social Security Advisory Committee — was made purely because of the increase in the housing cost index? If so, it is surprising that the Government gave no reason for an increase which at the time was so widely and extensively condemned.
About 400,000 families will be affected by the Government's savings. I wonder whether they realise what the impact of these changes will be. My hon. Friend the Member for Birkenhead referred to the fact that a working teenager might have to pay almost half of the family's housing costs. This point was made by the Social Security Advisory Committee. It said that this was unreasonable. If such a household were fortunate enough to have two working teenagers, the consequent deduction of £20.40 from housing benefit would mean that parents who are living on supplementary benefit would receive absolutely no housing benefit if their rent and rate payments were average.
This is in sharp contrast to the attitude of the Government's housing benefit review group, which pointed out that the full housing costs, whether rent or rates, of those on supplementary benefit should be met. The increases in non-dependant deductions mean that the Government are putting more and more people further and further away from having their costs met. This may result in public expenditure savings, but it will result in a very substantial increase in family tension. My hon. Friend the Member for Oldham, West said that the Government will be making a saving of about £250 million by the introduction of these measures.
One of the documents to which reference has not been made is the report of the Government Actuary. Once again the Government are keeping the balance in the fund at 23 per cent. However, the Government Actuary, upon whose figures the Government are normally anxious to rely, says that a prudent Government need not set aside more than 16 per cent. of their income. The national insurance fund is a notional fund, but the Government appear to be raising substantially more income than they need. That means that it is not a notional sum. They must be raising about £1 billion more than they need to keep the national insurance fund in balance. They are also raising it in a most regressive way. It will be raised through national insurance contributions. The Government have made a number of changes, but they had not come into effect when these figures were drawn up. Not only are the Government raising substantially more money than they need; year by year they are also reducing the amount of money which is received in a more progressive way from the tax system through the Treasury supplement.
In effect, therefore, the Government, as in so many areas of our national life, are taking rather less from those who are more able to pay and rather more from those who are less able to pay. We have heard a great deal this week about why the Government believe it to be right to increase the salaries of the better-paid members of our community. It is in line with the Government's approach that the only figures in this package of measures which show an increase above the level of inflation are the non-dependants' housing benefit deductions. That is sadly characteristic of this Government's attitude. Although, therefore, we welcome some elements of the package, the Government do not deserve full credit for it.

The Parliamentary Under-Secretary of State for Health and Social Security (Mr. Ray Whitney): I am grateful to the hon. Member for Derby, South (Mrs. Beckett) for at least having the goodness to recognise, in contrast to her hon. Friend the Member for Oldham, West (Mr. Meacher), that a number of factors in the uprating package are to be welcomed. She mentioned the changes to the vaccine damage payments and the changes that will affect nursing homes and residential care homes. The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) was also good enough to welcome those changes.
The uprating will add more than £2 billion to our massive social security programme. Even in the cut and thrust of parliamentary debate I had hoped that the charity induced at the end of the term would lead to a greater welcome by the Opposition of this package. Perhaps that was too much to ask of the hon. Member for Oldham, West.
Turning to pensions, we had the vignette of the hon. Member for Roxburgh and Berwickshire travelling around his constituency at the weekend trying to explain to his constituency pensioners the significance of the uprating of the basic rate of pension. I hope that he was good enough to explain the real increase since the Government came into office. If we achieve the projected rate of inflation, down from 7 per cent., there will be a 10 percentage point increase in the real value of the basic rate of pensions since 1979. I recognise the situation that he described, and that a number of people take a lot of convincing because they are constantly bombarded with a good deal of propaganda in the other direction.
Labour Members and members of the TUC have taken to misrepresenting our proposals on the state earnings-related pension scheme as a cut in the basic retirement pension. As we have constantly said and demonstrated, and are clearly demonstrating again tonight with these orders, our commitment to maintaining the value of the basic retirement pension is absolute and is fulfilled. The elements in the cost of living to which the hon. Member for Roxburgh and Berwickshire referred are taken into account in the RPI.
The hon. Member for Oldham, West saw some machiavellian plotting in the fact that to achieve many sensible advantages in introducing the uprating on an April to April basis, we were proceeding with two eight months uprating periods for pensions. He seemed to see some wickedness in that proposal. However, pensioners will have cause to recognise the benefit of that. It will more closely match the rate of inflation, although the hon. Gentleman seemed to have some worries that there would be a low or even no rate of inflation, which would cause problems for the pensioners.
As the hon. Gentleman knows, there has often been pressure for more frequent upratings than 12 months. I find it difficult to understand why he should be so concerned about uprating periods of eight months. The increase will reflect much more clearly the more immediate effect of the uprating from November 1985, and by July 1986 pensioners will have a much greater advantage. I hope that the hon. Gentleman will not seek to attribute the sort of tactics that might appeal to less charitable Governments to this one.

Mr. Meacher: Will the hon. Gentleman accept my proposition that it is likely that in July 1986, if the Government's inflation forecast is met, pensioners will get no increase?

Mr. Whitney: We shall have to wait to see what turns out. I cannot understand why the hon. Gentleman is so concerned that inflation should fall. I can understand that he might have some sensitivity about this, because he will remember, and he would like pensioners to forget, that the Government of which he was a member averaged an inflation rate of 16 per cent. in every year of office. Pensioners will never forget what that did to their savings. If the hon. Gentleman is upset that we are likely to have a low rate of inflation, I can assure him that pensioners will not be.
There was considerable discussion on child benefit, including the, as always, distinctive contribution from my hon. Friend the Member for Kensington (Sir B. Rhys Williams), who appealed to all Christian democrats in the House to welcome the commitment that the Government have reinforced to the universal provision of child benefit. Child benefit is an extremely expensive social security provision. About 6·9 million families and 12·3 million children are involved. From listening to a number of Labour speeches one would have imagined that something desperate was being done, but about £75 million in a full year is being added to the £4·5 billion that we spend on that benefit.
The hon. Member for Birkenhead (Mr. Field) is clearly unable to be here now. However, in answer to his point, I can say that we are prepared to go into the next election reasserting our justified proposition that we are the party of the family, because provision at that scale, at a time of justified stringency in our national accounting, is something of which we are proud. As my hon. Friend the Minister for Social Security pointed out, in addition to the increase, which I recognise is not fully in line with inflation, we have directed some of that to the lower end of the income scale through FIS and the housing benefit children's needs allowance.
Account has to be taken of the fact that the rest of the community—those who are not at the lower levels with which we are mostly concerned here—will benefit from our achievements in the years since 1979 on wage increases and tax changes. Since we came into office, the real income of the overwhelming majority has increased, whereas it fell for most people during the period of the Labour Government. The real take-home pay of a person on average earnings has gone up by 13 per cent.

Mrs. Beckett: I noticed with interest that part of the hon. Gentleman's justification is that most people are better off, but I understand that if one takes into acount the whole package of tax changes made by the Government, only people with incomes of over £18,000 a year are better off. The Minister may move in such circles, but riot everybody else does.

Mr. Whitney: I refer the hon. Lady to the statistic that I quoted. When the Labour Government were in office, people were actually worse off, and that point must be taken into account. I particularly made the point that we are talking about people on average earnings. I recognise the unemployed, but that category is not at issue The


increase under this Government has come about because with our child benefit we are targeting help more accurately where it is clearly needed.
The next source of concern for Labour Members was the non-dependant deductions. That seemed to take little account of the wages being discussed. It is important to remember that we are talking about, for the full non-dependant deduction of £10·40 a week, people between 18 and pension age. We are not talking about those on supplementary benefit, or the youth training scheme or pensioners, for whom the deduction will amount to only £3·90, but about those over 18 who would be expected, if they are in work, to face a deduction of £10·40.
The average gross weekly earnings of 18-year-olds last year were £83·60 for males and £73·90 for females. In relation to figures like that, it cannot be maintained that a deduction of £10·40 is in any way unacceptable. The hon. Lady referred to the last time there was a sharp increase. It was in 1982 rather than in 1984, when, on the same formula, housing costs for supplementary benefit cases were met under the supplementary benefits scheme and the non-dependant deductions increased by 21 per cent. In the following year there was no change in this item, despite increases in the main housing benefit and the supplementary benefit rate. Therefore, claimants have both gained and lost over the years by the application of that rule.
The cuts in relation to heating attracted a certain amount of attention and there were one or two areas of misunderstanding. The hon. Member for Roxburgh and Berwickshire referred to the estate rate heating addition. That has not been changed and his worries on that score are unjustified. Many of the cases he referred to would be eligible for the higher rate heating addition, and we are not putting an end to that. As my hon. Friend the Minister of State pointed out, nowadays the justification for the central heating addition is, to put it mildly, considerably less than it was, and it is scarcely to be maintained.
The hon. Member for Oldham, West (Mr. Meacher) seemed to be disturbed that some of the measures contained in our uprating proposals are in harmony with the proposals in our review. It would be rather strange if that were not the case. Having said that, I am not saying that the consultation process is anything but an extremely genuine and far-reaching one. It is, of course, the second stage of a lengthy and unique public operation.
For something like 18 months my hon. Friends the Secretary of State and the Minister of State had open hearings around the country and we received thousands of submissions. There were also many letters to the Department. After 18 months of careful study and review, all that resulted in the proposals. Then we had the period from June until mid-September for the second stage of the consultation process. I refer the House to another leaflet we shall be issuing today. It will give another fillip to this national process of consultation.
The House recognised the value of the increase in the limits on residential care and nursing homes and I welcome the support that those proposals received. When we introduced those measures, we said that we would continue to monitor their effects. The way in which we have done that has justified our promise. We recognise that the tightness of the nursing home provision and addition has caused difficulties, and I hope that the new

figures we have announced, a £10 increase in the basic rate and the increase of the addition to £50, will improve the position.
The hon. Lady asked about the provisions relating to under-25s, known in our Department as the ordinary board and lodging. We shall maintain careful scrutiny and we have shown, as we promised, a good deal of flexibility on the time limits and the exemption categories. We have a proud record on that. Our initial indications do not at present suggest that there is the same sort of case for an overall increase in November in the ordinary board and lodging limits as for residential care and nursing homes which my hon. Friend has announced. That, too, is something which we shall keep under careful review, and we shall certainly monitor it very carefully.

Mrs. Beckett: I do not wish to press the Minister too much, but perhaps I could ask him to say a little more on this point. Will he give me an assurance that it is not the Government's intention to wait until July 1986 before announcing any increase in the limits? The Minister will know that the residential homes limits were considered to be inadequate. A couple of days ago the Leader of the House accused the Opposition of pandering to popular sentiment, and, although I do not accuse the Government of doing that, I suggest they are a little more worried about elderly people in residential homes than they are about the young, against whom they seem to have a particular dislike. I should like the Minister to assure us that it is not the Government's intention to wait for another full year.

Mr. Whitney: I should like to correct a misunderstanding which the hon. Lady has perpetrated more than once. She alleges some hostility on our part towards the young, but that is by no means the case. One of the reasons why we acted as we did was the great damage caused and the new unemployment trap. We shall continue to keep that under review as we kept under review, for example, the exemption categories. We showed our flexibility on that. We also kept under review the level of charges in residential care and nursing homes. By monitoring those, my right hon. Friend was able to announce charges. The evidence is lacking to suggest that there is a need, or may or may not be a need, for uprating.
We are considering an important range of additions to the social security programme. They include major increases in retirement benefit, unemployment benefit, and widow's pension and benefits. They are all of 7 per cent., which recognises that that was the increase in the RPI for May. If our hopes are fulfilled, it will mean a significant increase, by the time those proposals are implemented, above the cost of living at the end of November.
The upratings are another fulfilment of our pledges. We have increased invalidity pension by no less than 12 per cent. We have established our commitment to the Christmas bonus—understandably, that is a sore point with Opposition Members—we have doubled the vaccine damage payments, changed other benefits, and significantly increased residential care and nursing home allowances. The package will cost more than £2 billion. Since we came to office in 1979, we have increased our social security budget by more than 30 per cent. in real terms. Most of the increase is accounted for by higher real-terms increases in all the major benefits scales. We are also paying for about 800,000 more pensioners.
The Government are proud of that record, and I commend the regulations to the House.

Question put and agreed to.

Resolved,
That the draft Social Security Benefits Up-rating Order 1985, which was laid before this House on 5th July, be approved.

SUPPLEMENTARY BENEFIT

Resolved,
That the draft Supplementary Benefit (Requirements) Amendment and Up-rating Regulations 1985, which were laid before this House on 8th July, be approved.
That the draft Supplementary Benefit (Resources) Amendment (No. 2) Regulations 1985, which were laid before this House on 8th July, be approved—[Mr. Newton.]

CHILD BENEFIT

Resolved.
That the draft Child Benefit (Up-Rating) Regulations 1985, which were laid before this House on 5th July. be approved. —[Mr. Newton.]

FAMILY INCOME SUPPLEMENT

Resolved,
That the draft Family Income Supplements (Computation) Regulations 1985, which were laid before this House on 5th July, be approved. —[Mr. Newton.]

HOUSING BENEFIT

Resolved,
That the draft Housing Benefits (Increase of Needs Allowances) Regulations 1985, which were laid before this House on 5th July, be approved.—[Mr. Newton.]

PENSIONERS' LUMP SUM PAYMENTS

Resolved,
That the draft Pensioners' Lump Sum Payments Order 1985, which was laid before this House on 5th July, be approved. —[Mr. Newton.]

VACCINE DAMAGE PAYMENTS

Resolved,
That the draft Vaccine Damage Payments Act 1979 Statutory Sum Order 1985, which was laid before this House on 22nd July, be approved.—[Mr. Newton.]

SOCIAL SECURITY BENEFIT

Resolved,
That the draft Social Security Benefit (Dependency) Amendment Regulations 1985, which were laid before this House on 22nd July, be approved.—[Mr. Newton.]

STATUTORY INSTRUMENTS, &C

Motion made, and Question put forthwith pursuant to Standing Order No. 79(5) (Standing Committees on Statutory Instruments, &amp;c.)

ELECTRICITY

That the draft Electricity (Borrowing Powers) (Scotland) Order 1985, which was laid before this House on 9th July. he approved.

CUSTOMS AND EXCISE

That the Customs Duties (ECSC) (Amendment No. 10) Order 1985 (S.I., 1985, No. 1027), a copy of which was laid before this House on 5th July, he approved.

TOWN AND COUNTRY PLANNING

That the draft Town and Country Planning (Fees for Applications and Deemed Applications) (Amendment) Regulations 1985, which was laid before this House on 25th June, be approved.

JUDGES

That the draft Maximum Number of Judges (Scotland) Order 1985, which was laid before this House on 1st July, be approved. —[Mr. Archie Hamilton.]

Question agreed to.

EUROPEAN COMMUNITY DOCUMENTS

LABELLING OF BEER, CIDER, PERRY AND WINE

Motion made, and Question put forthwith pursuant to Standing Order No. 80(5) (Standing Committees on European Community Documents).
That this House takes note of European Community Documents Nos. 10211/82, craft Directive concerning the labelling, presentation and advertising of beer, cider and perry, and 9452/83, two draft Regulations laying down rules for the description and presentation of wine, grape must and special wines, and supports the Government's intention of introducing measures requiring the indication of the percentage of alcohol by volume of all alcoholic drinks with the aim of reducing alcohol related health problems, and removing certain barriers to trade within the community. —[Mr. Archie Hamilton.]

Question agreed to.

Arthur Bell and Sons (Guinness Takeover Bid)

Motion made, and Question proposed, That this House do now adjourn. —[Mr. Archie Hamilton.]

9 pm

Mr. Bill Walker: I thank you, Mr. Speaker, for giving me the opportunity to debate the attempted takeover of Arthur Bell and Sons, a Scotch whisky company in Perth, by Guinness. I wish to make it clear from the outset that my concern in this matter is that of a constituency Member of Parliament and also the public interest. As I had to tell the BBC earlier today, in this matter I am no one's lackey. Neither I nor any members of my family have shares in Arthur Bell and Sons or in Guinness. During this short debate, I am afraid that I shall have some harsh comments to make about the self-regulating body of the City—the Panel on Take-overs and Mergers. I shall also make some comments about the role of the Bank of England in this matter.
Let me make it clear to the House that I support the stock market and that I am a passionate believer in the private sector and in the capitalist system. What I say this evening should not be taken as a reflection of my belief in this area. There are advantages in a self-regulatory mechanism, but I firmly believe that such a mechanism must be seen to be fair, and that justice must be seen to be done when the panel operates.
In the case of the attempted takeover of Arthur Bell and Sons by Guinness, I hope that I shall demonstrate clearly to the House that justice was not done, and was certainly not seen to be done. I shall also demonstrate that what one of my more flamboyant hon. Friends called, "Skulduggery in the smoke-filled rooms of the City," has taken place.
I regret very much the fact that my hon. Friend the Under-Secretary of State for Trade and Industry and my right hon. Friend the Secretary of State did not wait to hear the evidence that I shall present this evening before deciding on the matter. All aspects of this attempted takeover should have been more fully investigated, as I requested, by the Monopolies and Mergers Commission. During the past few weeks, I and several other Scottish Members from all political parties have made repeated requests for a referral to the Monopolies and Mergers Commission. My hon. Friend must realise that the fact that that did not happen will not be forgotten in Scotland.
My hon. Friend the Minister will be aware that, recently, there has been a dark cloud hanging over the activities of many stock and insurance markets. Following the disclosure of murky and dishonest activities by individuals and by groups of individuals in the system, Lloyd's was forced to introduce new rules and to insist on a new code of conduct. My right hon. Friend the Chancellor of the Exchequer has little reason to be pleased with the way in which the Bank of England behaved during the costly farce of Johnson Matthey Bankers, yet the Bank of England is supposed to be the guardian of the standards and morals of the City. The former deputy governor of the bank is the chairman of the Panel on Take-overs and Mergers.
The Financial Times of Friday 19 July, referring to a decision taken by the panel, said:
The conclusion, it seems, is that Mr. David Stevens—the chairman of the two companies—was not in concert with

himself but agrees that he should be regarded as if he were. This is nonsense. Given the widespread concern about the Panel's future ability to police a City impregnated with conflicts of interest, it is also worrying nonsense.
Having once been found out in a massive cover-up, any reasonable person must wonder whether it is just possible that the bank will again be party to another cover-up; party to an attempt to whitewash unacceptable acts in the stock market by firms and individuals which operate within the system.
Unless the Chinese walls of the City are seen to work, and unless they are believed to be an effective safeguard against inside vital knowledge being made available to unfriendly sources, the morals and credibility of the City must be at risk. If the Chinese walls can be or have been breached, this would not be good for the wellbeing of the capitalist system, the private sector or the stock market. I care very deeply about this, which is why I requested a meeting with my right hon. Friend and asked for the debate.
I shall present my evidence this evening in three parts. They are, first, the activities of the bankers Morgan Grenfell and Company Ltd. and the panel on Take-overs and Mergers; secondly, the misrepresentation of the facts by Guinness; and, thirdly, the importance of the independence of Arthur Bell and the importance of the whisky industry and the Scottish financial institutions to Scotland.
No one disputes that on 3 February 1983 the chairman of Arthur Bell wrote to Morgan Grenfell and suggested:
best interests would be served by a gradual winding down of our business connections.
What is in dispute are the events that followed. Morgan Grenfell claimed that the winding down was exactly what happened. The Panel on Take-overs and Mergers believed it. I do not, and I believe that I can show that the events which followed that letter demonstrate that Morgan Grenfell made determined efforts to retain its business connection with Bell and, what is more important, that it retained its business connection.
I have a letter dated 15 February 1983 written by Mr. Christopher Reeves to Mr. Miguel, the chairman of Arthur Bell and Sons:
We have had a very long relationship with your company and with yourself and I believe that David Ewart and Christopher Knight, the new Assistant Director whom I have allocated to you, will provide the sort of service that your are seeking.
The letter continues:
I do however hope that it will be possible for us to get together later on this year to review the progress that is being made on a series of most important moves for the development of your company.
The letter contains other matters, but those are the important phrases. That was dated 15 February, which is after the so-called severance of the two concerns.
I believe that I can show more than that. Morgan Grenfell actually improved the way in which it serviced Bell, and it did so, as the letter clearly shows, by the setting up of a new team to service Bell's. On 8 February 1983 Mr. Christopher Reeves, the chairman of Morgan Grenfell, wrote to Mr. Miguel concerning a meeting at 1.30 pm in the Connaught hotel. On 18 February Mr. David Ewart, director of Morgan Grenfell, wrote to confirm the visit by himself and Christopher Knight to East Mains, Dunfermline, Perth, and Pitlochry. This was to acquaint the new team with more of the details of the


company. Mr. David Ewart wrote to Mr. Miguel on 10 May 1983, talking about companies that might be suitable for takeover.
On 23 March 1983 there was a meeting in the London Hilton, attended by Mr. Miguel of Bell's, Mr. Cooper of Bell's and Mr. Reeves, Mr. Ewart, Mr. Kennedy and Mr. Knight of Morgan Grenfell. At that meeting Morgan Grenfell was asked to prepare a list of prospective acquisitions. On 22 July 1983 Mr. Cooper of Bell's wrote to Mr. Ewart:
As you know we aim to provide a comprehensive range of financial advisory services to our clients, but the extent to which those services are called upon varies considerably from client to client.
That letter discusses the charges that Bell's would have to pay. It continues:
It is our wish to provide Bell's with the best possible advice and best possible services.
On 7 July 1983, writing to Mr. Cooper, Morgan Grenfell said that there was a large public company, with a turnover of £.1·5 billion, which was in trouble and in which Bell's might be interested. The letter also mentioned another company in the food industry. It is an interesting letter.
On 3 February 1984 Mr. Ewart wrote to Mr. Miguel:
As you probably know I was at the Panel today with Patrick and was simply delighted at the final ruling. I enclose a copy of the Financial Times referring to … I rang Geoffrey Cooper and mentioned it to him this morning.
That is another company being suggested to Bell's.
On 20 April 1984 copies of reports and accounts were sent from Mr. Ewart to Mr. Miguel. On 28 March 1984 Mr. Colville wrote to Mr. Cooper suggesting an involvement in a sector in the United States. On 15 March 1984 Mr. Miguel wrote to Mr. Ewart thanking Morgan Grenfell for its assistance in bringing Gleneagles Hotels plc into the Bell's group.
On 9 April 1984 Mr. Ewart wrote to Mr. Miguel referring to "grand slam", that being the code name for a well-known company in the United Kingdom. On 25 May Mr. Miguel wrote to the chairman of Morgan Grenfell about "grand slam" saying:
I am looking forward to you and your team joining us here next Friday.
A copy of the letter was sent to Mr. Ewart.
On 9 May the secretary to Mr. Ewart wrote to the secretary of Arthur Bell's outlining details of the timetable for the meeting on Tuesday 22 May. Mr. Ewart was to join Mr. Miguel at the Sheraton Park hotel, Knightsbridge, for breakfast. They were then to take a taxi to Victoria, to catch the 10.30 am train to arrive at their destination at 11 am. On arrival they were to be met by a chauffeured car, the property of the chairman of "grand slam"—a well known company in the transport and hotel industries.
On 22 June 1984 Mr. Ewart wrote to Mr. Miguel with information about a company code named MATCH. He said:
We will need to discuss our next step, clearly … is a man who has to be handled with some care and we have to consider whether it is best for you to make a direct approach to him or whether we should get in touch with Hill Samuel, the company's advisors.
On 5 October 1984 Mr. Colville wrote to Mr. Cooper at Bell's:
As requested by you we have carried out"—
and this is important—
an update of our information on the above company. (Enclosed reports and information.) Please do not hesitate to contact me if there is any further information you require.

On 14 December 1984—close to the date when we first heard about the proposed takeover—Mr. Ewart wrote to Mr. Cooper a detailed letter, of which I have been fortunate enough to obtain a copy. The letter refers to the group structure of Bell's. Morgan Grenfell is advising Bell's on its group corporate structure and financial planning. The letter concerns the transfer or trading activities to a holding company and states:
From a taxation point of view such a change would be quite straightforward with capital gains tax losses remaining with the holding company whereas trading losses would normally accompany the trade and undertaking to the new subsidiary.
The letter discusses the forming of a new company, the effect on Bell's debenture and loan stock, the cost of that, the public relations aspect, the timing and so on. That letter was dated 14 December, which shows that Morgan Grenfell was immersed in Bell's structure, its corporate planning and its future at that date. To suggest some months later that somehow it was not involved is nonsense, and I shall show why.
Mr. Christopher Reeves writes to Mr. Miguel on 14 November 1984 thanking him for his good wishes on his new appointment, and continuing:
These are certainly interesting times in the City and I look forward to the challenges ahead. I too am sorry that we will not be able to meet in Edinburgh in December, but no doubt there will be another opportunity for us to get together, either in Scotland or in London.
On 20 December 1984 Mr. A. J. Corville of Morgan Grenfell wrote to Mr. Cooper at Bell's:
Accounts of"—
a liquor company—
Please let me know if I can be of any further assistance in relation to this Company.
Here is another proposed takeover. The minutes of Bell's board meetings throughout 1983 and 1984 discloses details of discussions and agreements on sensitive matters involving Bell's and Morgan Grenfell, plus details of accounts rendered when there was supposed no longer to be any connection with Bell's. They were accounts rendered and paid for. In March 1985, only days before the beginning of the events, I saw a letter inviting Mr. Miguel to attend with Morgan Grenfell a seminar on investment opportunities in Australia.
I believe that all this evidence—there is much more; I took what was only a sample—clearly demonstrates that Morgan Grenfell was working as Bell's merchant bankers right up to the time when the Guinness takeover was launched.
It is interesting to note that Mr. Miguel was asked to lunch on 21 November 1984 with Mr. Ian Watson, city editor of the Sunday Telegraph. Mr. Watson mentioned that a company was interested in acquiring information on Bell's. What is more, the bankers acting for that company were Bell's own bankers.
Mr. Miguel did not believe the story, yet it was confirmed later at the lunch by a colleague of Mr. Watson. On returning to Scotland, Mr. Miguel telephoned Mr. Christopher Reeves of Morgan Grenfell. He as unavailable, being in Europe. Mr. Miguel then spoke to Mr. David Ewart, who said
that he would be surprised if this was the case—and if it was, it was nothing to do with him.
Mr. Miguel was not satisfied and asked for Mr. Reeves to contact him to confirm that the information he had received was not correct. Mr. Reeves did not contact Mr. Miguel further.
All this information, and more, was available to the panel. I believe that it represents a clear case which shows that Morgan Grenfell was working both for Bell's and Guinness at the same time. I cannot believe that the managing director of Morgan Grenfell, Mr Christopher Reeves, Mr. David Ewart, and the director Richmond Watson, in charge of the Guinness takeover attempt, exchange only pleasantries when they meet.
I suggest that there is a prima facie case of the Chinese walls of the city having been breached. Is it any wonder that I must ask whether the panel decision was a whitewash, particularly when one realises that there is no recognised appeal procedure against panel decisions? That is why I wanted to consult the Minister before the decision was taken to go to the commission.
I draw the Minister's attention to reports that have appeared in the press in recent days to the effect that the Kuwait Investment Office bought 3·8 per cent. of Bell's stock on 17 June 1985, three days after the bid was announced. It bought at an average price of 270p, at a total cost of 13·5 million. It has also been reported, and not denied, that it has accepted, on its own behalf, 225p for all of the 3·8 per cent. share.
I remind the Minister that in January 1984 the Kuwait Investment Office was the under-bidder in the purchase of Gleneagles Hotels plc. Why, then, is it buying shares in Bell's at 270p and, a few days later, selling them for 225p, thus creating for itself a substantial loss? What is the pay off? Surely that is a reasonable question. Could it be that it will be given the chance to buy Gleneagles Hotels if Guinness is successful in its bid for Bell's? If so, this smacks of people acting in concert. Is this another example of "skulduggery in the smoke-filled rooms of the City"?
I am reminded that Mr. Peter Stevenson, a director of Moble Grossart, who is well known to my hon. Friend the Under-Secretary of State on the Front Bench, is, with some of his friends, a defender of an independent Scottish economy. It is Mr. Peter Stevenson who has attacked me in the press. I remind the House that he was a director of Gleneagles Hotels before the company was taken over by Bell's. Is that just another coincidence? Whatever it is, I find it fascinating that Arab money is used to purchase shares in a liquor company when the mere possession of liquor in Arab countries leads to flogging and/or imprisonment.
In the words of the right hon. Member for Glasgow, Govan (Mr. Milian), the Guinness publicity machine has been issuing statements that are unpersuasive and positively misleading. Why does Guinness want Bell's? The answer is that it needs Bell's to pay its United Kingdom dividend. If Mr. Saunders, who seems never to spend more than four years with any company, does not increase his dividend, he will be seen to be a facade. He does not wait for the truth about his pruning and surgery to emerge. He moves on before the truth emerges.
For example, pledges of no redundancies from Mr. Saunders are worthless. A few days before Christmas 1984, Guinness told its workers in Liverpool that they were managed by people who lived in the area and that they had strong local ties and roots. However, in May 1985, well over 200 long-service, loyal employees were made redundant. In 1984 Guinness took over Martin, the

newsagents. The staff were given assurances that there would be no redundancies. Despite the assurances, many long-serving, loyal staff were made redundant.
Guinness has problems and Bell's does not. Guinness cannot get its overseas profits into this country to pay its United Kingdom dividend. I understand that profits from Nigeria can take up to two years to get into the United Kingdom. Guinness is writing off advance corporation tax and it does not have enough United Kingdom earnings to pay its dividend. Guinness is in trouble and Bell's is not.
Bell's is a different sort of company from Guinness. I would describe Bell's as an ideal company. It is an identikit company of the Tory party. It is the sort of company that the Tory party dreams about. It increases sales every year but never cuts its prices to do so. It increases its profits every year and it has no redundancies. When it builds new plants and factories many miles away from existing sites, it busses its employees. Indeed, it has been doing so for over 20 years. Bussing is not a recent phenomenon in the Bell's organisation. It is the sort of company that every Member dreams about having in his constituency. I am sure that right hon. and hon. Members will tell me how fortunate I am.
The Bell's staff receive the same allocations for shares and get the same shares as directors when shares are allotted. Everyone in Bell's is treated alike and everyone works hard. The Scottish institutions, God bless them, have recognised this. They have remained with Bell's and I am thankful to them for that. They recognise that if Scotland has no home-based, profitable firms, the very reason for the existence of the Scottish financial centre will vanish. If we lose Bell's, which company will be next? Will it be The Famous Grouse, which is also in my constituency? Perhaps Mr. Saunders will have his eye on Distillers which, again, is in my constituency. I have an interest in the welfare of the Scottish whisky industry.
I can provide my hon. Friend the Under-Secretary of State with all the evidence that I have used this evening and much more besides. Perhaps it is not too late to prevent the destruction of the good name of the City, about which I care deeply. More importantly from a Scottish point of view, I hope that we can protect and safeguard the Scottish-based whisky industry, which has done so well for Scotland for so many years. It has been kind to the Exchequer for many years and it has helped the balance of payments for many years, which it will continue to do if it is managed effectively and efficiently by those who care.

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Alex Fletcher): I am grateful to my hon. Friend the Member for Tayside, North (Mr. Walker) for the opportunity to respond to certain views which he has expressed about the conduct of the Arthur Guinness bid for Arthur Bell, and takeover bids generally. He properly disclosed his interests in both companies by saying that he had no financial interests in either company. I can add to that by saying that I know for certain that he is not even a customer of Bell's or Guinness.
First, the merits of the bid and the way in which it is pursued are separate questions. My hon. Friend's view is that the bid has no merit, and that Bell's should remain independent. He is perfectly entitled to take that view, whether on the basis of a detailed evaluation of the Guinness offer or on broader constituency grounds. I


wholeheartedly agree with him that Bell's is a highly respected company. It has a good commercial reputation for its performance over many years, and as a neighbour. It is a good company from a social point of view, not only in the city of Perth but in Scotland as a whole. It is probably improper for me to say that Bell's has also been a good friend to the House from time to time.
However, it is Bell's shareholders, rather than I, whom my hon. Friend needs to persuade that he is right. My right hon. Friend the Secretary of State had decided not to refer the proposal to the Monopolies and Mergers Commission, as he announded on 23 July. The decision is in accordance with the recommendation of the Director General of Fair Trading, and was taken after full consideration of all the relevant issues. I discussed the issues with both companies, my hon. Friend and other hon. Members. They in turn, took the opportunity to present their cases to the Director General before he made his recommendations to Ministers.
It is now for the shareholders of Bell's to make up their minds and to proceed accordingly. They may or may not reach the same conclusion as my hon. Friend. The point is that the decision rests with them, not with the Government. I have made it clear to my hon. Friend that the Government's interest in such matters is in competition and the public interest. All the other matters relating to the performance and management of a company or companies, such as which is the better exporter, are clearly for the shareholders to decide. The grounds on which they make the decision are their own affair.
The essential questions for any shareholder in a company for which a bid is made are whether the consideration offered is adequate, and whether the acquisition of control by the bidder would or would not enhance the value of his asset. Those questions are not for the House because this is not the place to consider those commercial aspects of the bid.
My hon. Friend argued against the bid on grounds of propriety. In particular, he argued that the relationship which existed between the merchant bank Morgan Grenfell and Bell's before the bid should preclude Morgan Grenfell form acting for Guinness. He contends that the takeover panel erred in allowing Morgan Grenfell to act for Guinness, and suggests that alternative arrangements for regulating takeovers should be considered.
My hon. Friend is right to stress the importance of propriety in these matters, because that concerns the Government, but who acts for whom in the conduct of a takeover bid raises quite different issues from the merits of the bid as a commercial consideration. In any event, the circumstances that my hon. Friend has cited do not, in my view, justify the conclusion that it is improper for Morgan Grenfell to act for Guinness, or that the panel's judgment was flawed.
My hon. Friend suggested that justice has not been done in the City, but it is now about 20 years since the panel was constituted and the first code promulgated. That is a short time in terms of some City institutions but a fairly long one in terms of the developments that have taken place in securities markets over the past two decades. During that time the panel has been faced with numerous "vital and important" decisions. I quote my hon. Friend, and his words are apt. Their verdicts have not all been accepted nem. con. It would be remarkable — and dubiously to the panel's credit—if they had. But the

panel and the code have come to be accepted—indeed, they have been judicially recognised—as setting the standards which should obtain in this area.
The proposals set out in the Goverment's White Paper, "Financial Services in the United Kingdom", inevitably call into question whether the code and panel can continue to operate on the extra-statutory basis on which they have operated hitherto. The Government have not yet reached a conclusion, but we are no more minded than our predecessors have been to second-guess judgments taken by the panel on the basis of full consideration of all the material facts, particularly when neither of the parties directly affected has represented that the judgment was flawed.

Mr. Bill Walker: That is not true.

Mr. Fletcher: I have had no representations from Arthur Bell about the conduct of the panel. Bearing in mind my responsibilities and, more importantly, those of my right hon. Friend in these matters, I would expect a company that was under threat of takeover to make very strong representations. In my present post I am used to chairmen of companies and counsel coming to see me frequently to make representations in matters of this kind. I can only declare my surprise, in view of my hon. Friend's comments, that it has not happened in this case.

Mr. Bill Walker: My hon. Friend is not denying that I asked for a meeting. I only cancelled it subsequent to the decision on the referral. My hon. Friend will be aware that I asked for that meeting, and I gave details of who would probably be coming to it.

Mr. Fletcher: Yes, that is correct.
I say to my hon. Friend in the friendliest possible way that if Arthur Bell and Company and their advisers feel half as strongly about the matter as my hon. Friend suggests, that justice has not been done in the City, and that they have been deceived and treated badly, I can only express my surprise that they should cancel the meeting. The fact that a decision had been made not to refer the matter is one thing. The fact that they felt that the City institutions were behaving dishonourably towards them is quite another. If the company felt as strongly as my hon. Friend suggests, it should have made a complaint.
I am concerned that, in his very strong defence of Arthur Bell and Company this evening, my hon. Friend should have impugned Lloyd's and the Bank of England, and generally the good name of the City, particularly in the light of the fact that we have had no representations from Bell on these matters.
However, I am particularly sorry that my hon. Friend has repeated in the House that the Deputy Governor of the Bank of England is the chairman of the takeover panel, because he is not. They are two quite separate persons. The Deputy Governor of the Bank of England is Mr. C. W. McMahon and the chairman of the takeover panel is Sir Jasper Hollom. I have seen no evidence from my hon. Friend and he made no justification for his charges about the City. I repeat that I understand how strongly he feels. However, an hon. Member always has to be careful about abusing parliamentary privilege when making representations of this sort unless they can be properly substantiated.

Mr. Bill Walker: If I have in any way impugned the Bank of England incorrectly, I withdraw unreservedly and apologise. I shall investigate further.

Mr. Fletcher: I am sure that my hon. Friend's remark will be appreciated by those concerned.
It would not be right for me to go into matters of detail furnished to the takeover panel on the basis that they would be treated in confidence. I shall confine myself to a couple of essential facts. The first is that both Guinness and Bell's agreed of their own free will to accept the panel's verdict. There was nothing to stop Bell's from pressing objections at law to Morgan Grenfell advising Guinness. They were not obliged to let the panel decide. They chose to. I have had no representations from them that the panel should have reached a different view.
The second is that, while I do not doubt my hon. Friend's good faith, my inquiries throw a rather different light on this matter. If my hon. Friend took another look at Bell's files, he might observe that in the Gleneagles case that he mentioned Morgan Grenfell acted not for Bell's but for the other side.

Mr. Bill Walker: I knew that.

Mr. Fletcher: He might also entertain the possibility that the letters referred to in the panel's decision terminated Morgan Grenfell's position as Bell's merchant banker. In those circumstances he might think it natural enough that Morgan Grenfell should make some attempt to restore it, hence the contents of the letters that I listened to very carefully and my hon. Friend's reference to a new team to serve Bells.
However, the point is that Bell's and Morgan Grenfell decided to accept the panel's verdict on this matter, and this they have done. The future of Bell's is now, correctly in my view, in the hands of the company's shareholders.

Space Technology

Mr. Michael Marshall: I am grateful for this opportunity to debate the United Kingdom space technology programme. I make that comment in no ordinary sense because the facility provided for an additional Adjournment debate is much appreciated, and I am grateful for the help which I have had from Mr. Speaker's office in making this possible.
I am also grateful to my hon. Friend the Minister of State for Information Technology for being in his place. I hope that he, too, will regard this as a useful opportunity to discuss a very important subject which we get all too few opportunities to debate.
I am also conscious that my hon. Friend the Member for Welwyn Hatfield (Mr. Murphy), who referred to the undoubted British success in the Glotto satellite launches, is in his place, as are my hon. Friend the Member for Tayside, North (Mr. Walker) and others of my hon. Friends.
I take a slightly old-fashioned view in referring these days to the Supply Estimates. Under our more flexible system, we do not need to justify subject matters in initiating debates in the House. But it is important to hon. Members who may wish to look at these matters in more detail to refer to class IV, vote 6, of the Supply Estimates, which relate to scientific and technological assistance by the Department of Trade and Industry. Those who do so will find the sum of £65 million in the current Supply Estimates as expenditure, for domestic and civil space programmes to the extent of just under £14 million and contributions to the European Space Agency to the extent of £51 million.
It is to the European Space Agency that I want first to address my remarks.
I should declare my interests at the outset. I am the parliamentary adviser to the Space and Communications Division of British Aerospace. But in this context I am also proud to declare my interest as chairman of the all-party Space Committee, and it was in that latter capacity that I returned earlier this month from Kourou in French Guiana after witnessing the successful launch of the British-led Glotto satellite by the European Ariane launcher.
The significance of that experience, was, I believe, twofold. The first is that, with my hon. Friend the Minister of State, officials and representatives from all our European partners, we were privileged to see what an outstandingly successful facility we have in the Ariane space launch facility. We were part of space history and of a genuine success story for European technological collaboration. The delegation from the House, which included the hon. Member for Blaydon (Mr. McWilliam) —in this context I regard him as a friend—the hon. Member for St. Helens, South (Mr. Bermingham) and my hon. Friend the Member for Elmet (Mr. Batiste), represented the all-party space committee and we witnessed the successful demonstration of that launch capability in a precise time slot.
Had there been any hitch in the launch capability or the delivery of the satellite, we should not have witnessed the arrangements by which that satellite is to explore Halley's comet—named after the second Astronomer Royal, Esmond Halley—and we should not have been able to


see the successful launch of that mission. Indeed, it would be about 76 years before one could hope to see that exercise repeated.
Within Arianespace, as is perhaps well known, there is a majority French stake, but there is also a United Kingdom equity stake. I understand that British Aerospace and other parts of British industry have a current interest in increasing the United Kingdom equity stake. I hope that my hon. Friend may feel able to comment on that point tonight because I believe that we should all welcome that kind of increased participation in an undoubted European success.
The rocket stabiliser and some of the launch equipment comes from this country and therefore we have a direct industrial stake in the Arianespace rocketry.
I also appreciate the fact that the Department of Trade and Industry contributes to the Arianespace technological fund and to the cost of the launch site.
On the evidence of our vist to Kourou, that investment and the financial support for which the Department of Trade and Industry is responsible is well placed. I have already said how the European launch capability has a proven track record. It compares extremely well with the United States shuttle and is acquiring its own consumer preference. Above all, it provides competition for the American space shuttle without which we should have all been captive to that launch facility.
Significantly, in the case of the Giotto satellite, Arianespace did not just put the satellite successfully into orbit in the precise time slot, we also saw the launching of a satellite in which British Aerospace had the opportunity, as the prime contractor, to demonstrate yet again that with communications satellites, remote sensoring and scientific development, the United Kingdom—that is not confined to British Aerospace because Marconi, Ferranti and many other companies are involved — has a major facility and success on its industrial horizon.
The second significant feature of the Kourou experience was not just that we saw a European consortium led by British Aerospace, but I have great pleasure in putting on record the fact—we frequently reflect on the difficulties and problems that surround us—that we had a project on which it was crucial to deliver on time, to specification and price, and that all those points were met. Any slippage or failures, as I said, would have meant nothing less than a three quarters of a century delay before we tried again.
Now we must wait until March 1986 for the future exploration of Halley's comet. The satellite will attempt to take television cameras within 500 km of the comet's nucleus. That is an exciting project and one which has captured the imagination of young people throughout Europe. I welcome the way in which an effort has been made to attract their interest. That is not only important industrially and scientifically but is part of the way in which youthful enthusiasm for these matters can be harnessed to work which is important and which points to growing job opportunities in space technology.
As for the Giotto-Halley's Comet mission, we look forward to a steady stream of technical and scientific data, and a unique study of the comet, that will be directly related and relayed, as is other current work within the European Space Agency — be it on communications satellites, remote sensing satellites or the whole raft of

space technology — to ESA's ground facilities, particularly to the research and technological centre, known as ESTEC, in Holland arid the space operations centre, known as ESOC, in Germany.
The all-party space committee was indebted not only to Arianespace for the Kornou unit but also to ESA, for subsequent visits to the ESTEC and ESOC facilities in Holland and Germany. We could not have been more impressed, not only by the level of expertise and dedication of all who work there on our behalf but also by the genuine European spirit that was evident. There are times when we in the House perhaps feel that the European ideal is weakening and that there are few success stories, but we certainly have one in the European Space Agency.
At the same time, I cannot ignore the fact that wherever we went we met substantial numbers of British scientists and engineers, whose work is highly regarded, they were seen as key personnel and employees within the European Space Agency.
Within the Europan Space Agency and the European launch capability of Arianespace we have as I indicated earlier a real success story. The Minister has played a notable part in the European Space Agency family and at the ministerial meeting in Rome earlier this year, not only by reinforcing and supporting the future of ESA but by committing the United Kingdom to a substantial stake in that work. I hope that he will take this opportunity particularly to reaffirm the Government's commitment to the future of ESA. As I see it, we now have a long-term commitment because of the agreement at the summit on the future of manned space stations and the opportunity for ESA and NASA to work together. That is also true of the whole range of ESA activities that I have tried to outline.
I hope that the Minister will also say something about two major domestic issues. The first is direct broadcasting by satellite. Widespread disappointment has been expressed at the apparent collapse of the so-called "club of 21"—the attempt by the BBC and the independent television companies to decide how to use a British approach through UNISAT, the industrial consortium of British Aerospace, Marconi and British Telecom.
I must report that in talks between the all-party space committee and the European Space Agency, one of the factors that in a sense rubbed in our disappointment was the strong feeling that within Europe there is now a major growth of direct broadcasting by satellite. There is the French-German scheme, and there is now the strong possibility of an Irish-Portuguese DBS system. There is also the Italian DBS provided on the ESA large satellite capability. However, for a variety of reasons, the United Kingdom proposals have run into the sand.
The Government are inclined to say that it is for the television industry and the industrial suppliers to work this through. But given the experience of other European countries, two things must be said. First, within ESA and elsewhere we were told time and again that Europe cries out for the quality of British programming. It would therefore be the ultimate irony if the only English language programming came from the English language service of the French-German satellite or another source that were essentially oriented outside the United Kingdom. I am not simply making a chauvinistic point about the excellence of our programmes. There are also a wide range of industrial implications. By definition, anybody who is involved in direct broadcasting by satellite will be involved in the opportunities for industrial development in


down link equipment, dishes and many other items. I hope, therefore, that my hon. Friend the Minister for Information Technology will be able to say a few words about what the Government can do to facilitate a new initiative on United Kingdom direct broadcasting by satellite. The widespread assumption is that the Home Office will call for new franchises. I appreciate his problem in speaking on behalf of other Departments, but anything that my hon. Friend can say to encourage those who have an interest in these matters will be timely.
Finally, I am anxious that an early announcement should be made about the proposed United Kingdom space centre. I appreciate that many problems have to be overcome. For example, it is important that the right people and the right site should be chosen for the centre. The bringing together of major Departments, notably the Department of Trade and Industry, the Department of Education and Science and the Ministry of Defence, would be a logical extension of one of the unsung successes of the Government: the creation of interdepartmental liaison.
It should also draw on some of the outstanding work on behalf of British science in centres of excellance such as the Rutherford Appleton laboratory.
The future success of our space policy will very much depend upon whether a space centre can be established. This takes on added significance in terms of the summit commitment to explore the possibility of European-American collaboration on space platforms.
We must also consider whether the United Kingdom can play a role with the United States in the strategic defence initiative. Space is an area of high policy and we must adopt an effective approach. A space centre would be a logical channel for that policy. I am pleased about the Government's commitment in principle and I hope that my hon. Friend will be able to make an announcement before we return from the summer recess. If he can, he will be doing a service not only to the House but to the country.

The Minister for Information Technology (Mr. Geoffrey Pattie): The record shows that this Government have provided sustained financial and political support for the development of space technology and the space industry in Britain. I am grateful to my hon. Friend the Member for Arundel (Mr. Marshall) for providing me with an opportunity to put some of these facts on the record. I am also grateful for the sustained and well-informed interest that, as chairman of the all-party committee on space, he takes in the subject. In the past five years my Department has invested nearly £300 million in space technology, and the annual expenditure has increased by some 45 per cent. Civil space expenditure across the whole of Government has risen broadly in line with this. Over the same period, the performance of the British space industry has out-paced this growth. From a turnover of less than £100 million in 1979, the industry's turnover is estimated in the current year at £250 million. This year, British companies led the two competing consortia to fill a contract for$150 million to provide maritime communications satellites to INMARSAT. British Aerospace led the successful bid and the way in which the major American space companies were prepared to take a back-seat shows the high standing which the British industry enjoys throughout the world. United Kingdom industry has also

secured the largest non-United States share of the most recent procurement by the international telecommunications satellite organisation INTELSAT.
In the defence market, an all-British consortium of British Aerospace and GEC-Marconi followed up its contract for two SKYNET IV satellites by winning a further order this year for a third satellite. The latest contract will be worth some £40 to £50 million. The companies are pursuing international markets in this sector with full Government support and encouragement.
My Department's primary objective in supporting civil space research and development has been to promote the development of profitable industrial and commercial organisations capable of producing and exploiting space hardware, software and services — particularly in communications. Employment in the industry is growing at more than 10 per cent. a year and the current order book is twice the size of annual turnover. Space is a success story, and we are undoubtedly achieving our objective. The continuity of the Government's policy has been an important factor in providing a stable climate for growth, but the responsibility, and congratulations for that growth lie, quite rightly, with the industry itself.
The space business is a risky business and, just as it has been impossible for the space industry to bear the burden of investment by itself, so it has been important for the United Kingdom to co-operate with the Governments and industries of other countries in major development projects. The United States and the Soviet Union have had the economic strength, political will and defence requirement to develop a fully comprehensive space capability. There is now a recognised third force in space—Europe. By collaborating through the European Space Agency, the 11 member states and three associates have between them also developed a comprehensive capability.
Britain was a prime mover in establishing the agency in the early 1970s, and we continue to devote some three-quarters of our space technology expenditure directly to the programmes of the agency. We have in particular concentrated our efforts on the communications satellite programmes and enabled British industry to achieve prime contractorship on every major programme in this sector. This has paved the way for the commercial successes of which I spoke earlier. Our participation in other projects has been necessarily more modest but no less impressive. The guidance system on the European rocket Ariane is supplied by Ferranti and the launcher has delivered its payloads into orbit with such accuracy that the life of the satellites has been extended by up to two years.
The United Kingdom has also an internationally renowned space science community. In the ESA's mandatory science programme, British scientists have been extremely successful in their proposals for flying instruments on European satellites, and in obtaining observation time in competition with proposals from scientists in other member states. The same is true of their co-operation with the United States. The Spacelab 2 shuttle flight, which is due to be launched next week, will carry two United Kingdom scientific experiments—the only non-American experiments selected by NASA for this United States scientific mission. Incidentally, the pallets on which the experiments will be flown were manufactured by British Aerospace.
The Government will continue to support the development of space technology by sponsoring projects


which break new technological ground but also promise long-term commercial potential. I therefore gave full support for the new 10-year long-term plan of the European Space Agency which was discussed at the Ministerial Council in Rome at the end of January.

Mr. Christopher Murphy: My hon. Friend is making a generous tribute to British Aerospace, and that means many of my constituents both in the management and work force who contribute towards the wonderful work in the space programme. The work force and management at British Aerospace equally appreciate the dedication and interest that my hon. Friend and his colleagues in the Government have shown in paving the way towards making sure that the United Kingdom is a major force in the space business.

Mr. Pattie: I am grateful to my hon. Friend for those kind remarks. I know that my hon. Friend the Member for Arundel has already mentioned that he and I were present in French Guiana when the Giotto satellite was launched. We were not only very impressed by the work carried out by the British Aerospace team, but when I met the people concerned I was impressed by their sheer professionalism and dedication. Within the overall plan, I expect the British contribution to provide continued support in communications in the ESA programme, with the development of payloads and on-board switching techniques for the markets of the mid to late 1990s and in existing and new satellite remote sensing programmes.

It being Ten O'clock, the motion for the Adjournment of the House lapsed, without Question put.

Motion made, and Question proposed, That this House do now adjourn. —[Mr. Lang.]

Mr. Pattie: The latter will include not only the development of conventional satellites but their successors, the refuellable, maintainable space platforms which will form part of the international space station capability.
Following the agreement in Rome, work has now begun on the preparatory phase of the European space station-related progamme Columbus. Originally a proposal by Germany and Italy for a pressurised laboratory module and astronaut-tended co-orbiting platforms, the programme has been expanded to take account of British proposals which include platforms operating in the polar orbits, particularly suitable for remote sensing. British Aerospace has now won the ESA contract to lead on the development of all the platform elements in the Columbus programme and its proposals have attracted great interest in the United States from both the National Aeronautics and Space Administration and National Oceanic and Atmospheric Administration.
The space station project will entail major advances in technology and in the way in which we operate in space. The presence of the space station will eventually impact on the design of all spacecraft, and the Government believe that it is essential to assess the costs and benefits of the programme from the close involvement which we gain as a full participant in the project definition phase.
We shall also be looking to substantiate the prospects which are foreseen in the programme for major advances in technologies with clearly identifiable terrestrial application, such as robotics, data management and communications. British companies are involved in all these areas and it is important for us to take advantage of

the opportunities to build up our technology in them. We also need to gain access to the various parts of the space station for our user community. However, we were keen to obtain leadership on the platform elements because we believe that, particularly in its polar-orbiting form, the platform best meets the needs of those users we have already identified; that it would be attractive to the United States as part of their own capability; that it is well suited to the skills which our industry can offer; and, most importantly, that it looks the most commercially promising part of the programme.
If I have emphasised the more commercial programmes of the ESA, it is because my Department is responsible for the Government's contribution to these. But it would be wrong to discuss space technology without returning to our scientific successes which I touched on earlier and in particular to congratulate the European scientists and engineers involved in the Giotto programme to intercept Halley's comet. I was privileged to be in French Guiana on 2 July when Giotto was launched, as were my hon. Friend who initiated the debate and some of the members of the All-Party Space Committee.
The choice of mission shows great imagination by the European science community. This spacecraft will provide information about comets that is expected to provide clues to the origins of the universe. At the same time it will attract great public attention and generate interest in the achievements of both the United Kingdom and the European space programmes. Great ingenuity has been shown in squeezing as many as 10 experiments on the spacecraft, and one of the British experiments, the dust impaction detector, even makes use of the shield designed to protect the spacecraft during the early stages of the encounter. The spacecraft was primed by British Aerospace leading a European consortium. It is a remarkable compliment to industry's ability to work to severe time pressures that the development has taken less than four years. As my hon. Friend the Member for Arundel said, when the target does not reappear for 76 years, industry could not afford to miss the very narrow launch window which was available. Other areas of British industry could usefully study the techniques practised by our leading space companies to learn ways of increasing quality and reliability.
While our contributions to the programmes of the ESA have grown, we have also seen an increase in the complementary national programme of space technology which my Department supports. Much of this is managed by staff at the Royal Aircraft Establishment at Farnborough, including the National Remote Sensing Centre which is housed at the establishment. The programme involves the development of space technologies which will be relevant to future satellite programmes. It also includes the study and definition phases for some bilateral projects, such as the RADARSAT remote sensing programme which is being jointly studied with the Canadians.
As my hon. Friend is well aware, the Government's space activities involve several Departments and public bodies. I continue to chair the two committees which he established and which co-ordinate policy within Government and discuss policy issues with the space industry and user organisations. However, the Government took the decision earlier this year that there was a need to build on those co-ordinating arrangements,


and establish a British National Space Centre to improve the development of space technology in the United Kingdom and to co-ordinate policy more effectively.
A growing range of users of space services is spread across Government, academic institutions and all types of industry. As they have become more aware of the benefits offered to them by space, it has become more important to establish a single focus to which they can turn for advice and technical support. We hope that they will seek to influence the programmes of the centre by making their own financial contributions. Our aim is to improve the use of public resources, and I believe that one of the most effective ways in which we can be sure of achieving this aim is to invite industry to play a major role within the centre. Detailed discussions are taking place, and I hope to be ready to make an announcement in September.
The establishment of a National Space Centre does not signal a new direction in space policy. Rather, it emphasises the Government's commitment to the development of space technology for industrial, scientific and defence purposes. ESA will remain the cornerstone of our civil space activities and I left my colleagues at the Rome Council in no doubt about Britain's continuing role in Europe and our determination to play a major role in space activities.
My hon. Friend referred to direct broadcasting by satellite. Having supported the development of the necessary technology, the Government's view remains that the introduction of an operational direct satellite broadcasting system in the United Kingdom should be carried out as a purely commercial venture. My right hon. Friend the Secretary of State for the Home Department has received a representation from the shadow Broadcasting Board on the various feasibility studies that have been undertaken, and I expect his response to be announced soon. In view of that, my hon. Friend would not expect or wish me to go further now.
Even at this relatively late hour, I would like to congratulate my hon. Friend on the timely way in which he has brought this subject to the attention of the House. Britain's involvement in space is a success. I thank my hon. Friend the Member for Welwyn Hatfield (Mr. Murphy) for his support. This debate has allowed us to give the industry the public recognition which it richly deserves.

Silloth (Travel-to-work Area)

Mr. David Maclean: I am grateful to you, Mr. Speaker, for scheduling the Adjournment debates today to slot in an extra one, which has given me the opportunity to raise this matter. I am grateful for the help of your office, and I am grateful to my hon. Friend the Under-Secretary of State for Employment for cutting short an engagement to reply to the debate.
After a debate on space exploration, we must come down to the problems of Silloth on Solway, in my constituency. However, this is an important subject to me and to many of my constituents. In 1983 and 1984, the Department of Employment carried out a review of travel-to-work areas. The review used data about travel-to-work patterns from the 1981 census of population, and the results were published on 16 July 1984. The new travel-to-work areas and the wards in them make up the building blocks for the revised map of assisted areas published by the Department of Trade and Industry.
In making the calculations, the Department of Employment has made a fundamental error in assigning Silloth on Solway to the Carlisle travel-to-work area instead of the Workington travel-to-work area. To prove that point, I hope to show my hon. Friend that the new travel-to-work formula, based on a random 10 per cent. sample of the population, can go dangerously astray when dealing with such a small sample. In addition, I shall show from the evidence collected from main employers in the area that the majority of the work force in Silloth are Silloth-based and Workington-based rather than Carlisle-based.
It is necessary to understand how travel-to-work areas are defined and how individual electoral wards, which may be 50 or 100 miles apart, are allocated to them. The Department admits that there is no one theoretically correct algorithm for grouping areas in this way. Nevertheless, it has adopted a formula which is described simply as the commuting links formula. Algebraically, that formula is described as
Fa.b/Ra. · Fa.b/Wb + Fb.a/Rb · Fb.a/Wa
Fa.b is the number of journeys to work from area A to area B, Ra is the number of workers who live in area A, and Wa is the number of people who work in area A.
That is sufficient to deter most people from querying whether the Department of Employment has it right. Fortunately, the Employment Gazette described how the formula and algorithm were used in practice. The algorithm used to arrive at travel-to-work areas consisted of five stages. Since my hon. Friend knows all those stages, I will not go through them, except to say that I believe that it was at the fifth stage that the Department made the fundamental error over Silloth on Solway.
If Silloth on Solway was allocated to a TTWA on its merits, it would certainly be associated with Workington on the west coast. However, wards are considered not on their own, but in relation to the commuting links with the next door ward. To the east of Silloth ward lies Waver ward, a large rural area stretching well over to the east near to the Wigton wards. Wigton, naturally and rightly, has close commuting links with Carlisle TTWA, and is


assigned to that. Because most of the rural population, particularly in the eastern part of Waver ward, has, after Carlisle, the closest commuting links with Wigton, Waver ward has been assigned to Carlisle TTWA.
The Department has got Silloth wrong because the industrial estate in Silloth on Solway is technically a few hundred yards within the Waver ward boundary. Most people know it as Silloth airfield industrial estate, and know that it is an integral part of Silloth town, so much so that the vast majority of workers in the factories there come from Silloth. Nevertheless, it completely distorts the figures because technically all the workers from Silloth commute daily to Waver ward a few hundred yards away. That is because Waver ward has been dragged inexorably towards Wigton, which has links with Carlisle, so Silloth is also shown to have the closest commuting links with Waver ward, and is technically also allocated to Carlisle. A study of a map would demonstrate this much more clearly than my explanation.
We thus have the anomaly of a large rural ward such as Waver covering 40 or 50 square miles, not densely populated, but with a majority of people in the eastern part looking to Wigton and Carlisle for their natural commuting links, while tucked away in a small corner on the western extremity of the ward is the industrial estate of Silloth, which then gives a totally wrong loading to the commuting links formula.
As one of the factors governing the choice of algorithm was its ability to produce contiguous areas, the geographic position of Silloth, bounded by the sea on one side and on the other three sides by Waver ward, must mean that it is extremely unlikely that Silloth will be allocated to a different TTWA from the one to which Waver is allocated. This view is confirmed by the travel-to-work patterns.
On the basis of the figures given in answer to my parliamentary question of 15 April 1985, the approximate commuting link factor between Silloth and Waver, based on those in employment only, is 0·07, which is much stronger than any of the factors given in answer to my parliamentary question of 30 April when I asked:
what was the value of the calculations of the measure commuting links formula for (a) Silloth ward and the wards 2, 6, 7, 8, 9, 10 and 13 of Carlisle … area".—[Official Report, 30 April 1985; Vol. 78, c. 106–7.]
The answer was 0·00702. The factor between Silloth and Aspatria and Ellen wards was 0·00009, and the factor between Silloth and Castle, Dalton, Netherhall, Northside, St. Michael's, Stainburn and Westfield wards was 0·00010. I also asked about the factor between Waver ward and Wampool and Wigton wards, to which the answer was 0·00014. Between Waver ward and Aspatria and Ellen wards, it was 0·00006, and between Castle, Dalton, Netherhall, St. Michael's, Stainburn and Westfield wards, it was 0·0. If one studies this carefully, it can thus be seen that there is a very strong commuting link factor between Silloth and Waver, which everybody knew without the necessity for the formula which I have described. Thus any argument I make to my hon. Friend that Silloth has been wrongly allocated must also include consideration of Waver ward. The evidence from the census for allocating Silloth and Waver to Carlisle was very slight.
The crucial point is that the commuting factor between Silloth and Waver was 0·07. However, the commuting factor between Waver and Aspatria and Ellen was 0·00006. The commuting link between Waver and

Wampool and Wigton was 0·00014. On those grounds alone, Waver was allocated to Wampool and Wigton, which thus had a stronger commuting link by a figure as splendid and as large as 0·00008. That is an incredibly small difference. I estimate that it could represent fewer than 10 journeys in each direction. On that basis alone, Waver was allocated to Wampool and Wigton. The travel-to-work patterns are based on a random 10 per cent. sample of census forms. Thus there could be a number of people commuting from Waver to Aspatria without that being reflected in the sample.
Let us suppose that the true number of journeys from Waver to Aspatria and Ellen was 10. There is roughly a 35 per cent. chance that none of the forms mentioning those journeys would appear in the sample. Similarly, if the actual number of journeys was 20 or 30, there would be probabilities of 12 per cent. and 4 per cent. respectively, but the sample would still suggest that there were no journeys.
If the number of journeys from Waver to Aspatria and Ellen had been 10 rather than zero, the commuting link factor would have been 0·00016—a stronger link than between Waver and Wampool and Wigton. Therefore, the allocation of Waver to the Wampool and Wigton Proto travel-to-work area may have depended on the random selection or otherwise of a single census form.
Because I believe that a random 10 per cent. sample is far too dangerously low a formula to use in a sparsely populated rural area, I conducted my own survey of the five major firms that account for most employment in the Silloth area. My sample shows a very different pattern of commuting from that shown in the 1981 census. However, in some respects our figures agree, which shows that my sample is based on valid criteria. The 1981 census identified 670 people working in Silloth; my sample of five firms four years later identified 700. The 1981 census identified 440 of those workers resident in Silloth. My sample identified 380. The remaining 60 will be made up of employees of smaller firms which I did not survey. Our figures are so close that no one can argue that my survey is inaccurate.
However, the figures show a different result for those commuting into Silloth from other areas. The random 10 per cent. sample of the 1981 census suggested that 110 of the Silloth workers commuted from the Carlisle TTWA and only 40 from Workington. My comprehensive survey, carried out in 1985, showed that only 84 commuted from Carlisle and 236 from Workington. Those are not minor statistical aberrations — they are glaring differences between the figures.
Let me read to the House extracts from letters I have received from the managing directors of the various firms concerned. One firm employing 55 workers states:
Our staff locations done in a recent survey are as follows — Silloth 21, Maryport 11. Aspatria 11, Wigton 6, Abbeytown 6. 90 per cent. of our staff, therefore, come from the Maryport catchment area.
That managing director goes on to make the point I have endeavoured to make. He says:
Firstly, all the factories on this airfield of which we are one are not in the Silloth Parish area and are included in the Waver District. The Waver area is allied to Wigton which is allied to Carlisle. With our intimate knowledge of Silloth we can only assume that all people travelling, to Silloth Aerodrome and to British Sidac in Wigton are counted as travelling to Carlisle area. In our experience of employing people, our catchment area covers Maryport District in nearly every case. Applications for


jobs come overwhelmingly from the Maryport area. We have had hundreds of applications and have never, ever had an application from Carlisle.
All the other four firms make the same point. One states:
Total number employed 149. From Silloth 93. From Carlisle 12. From Workington 44.
I do not need an algebraic formula to determine where the
strongest commuting links are in that case.
The fifth major employer in my survey gave me this information:
Total number of staff employed 184. Number from Silloth 46. Number travelling from Carlisle TTWA 22 and number travelling from Workington 116.
The managing director went on to state:
As you can see from these figures, there is no doubt in my mind that in the case of our company we are providing a valuable service to the Workington TTWA, which has a high level of unemployment, especially in the non-skilled working area which we are mainly employing. We run transport daily, at our cost, from Workington via Maryport to the works and it is clear from the figures that we draw mainly on this area for our labour force.
The 1981 census and my survey show that 60 per cent.of those working in Silloth reside in Silloth. A random 10 per cent. sample from the 1981 census shows that 16 per cent. of those working in Silloth travel from the Carlisle area, and on that basis—a basis of 16 per cent—the Department of Employment has allocated Silloth to the Carlisle TTWA.
That would be a poor basis on which to make an allocation even if the figure was correct, but I submit that the figure is grossly inaccurate. My comprehensive survey shows that only 12 per cent. of workers in Silloth have commuting links with Carlisle. For Workington, the
random 10 per cent. sample shows that only 5 per cent. of the Silloth workers have commuting links with Workington.
However, the correct figure, as evident from my survey, is 34 per cent. There is no doubt that a serious error has been made, and I know that when my hon. Friend has had a chance to read my speech in Hansard tomorrow, and study the figures for himself, he will inevitably come to the same conclusion.
I do not expect the Minister to give me an instant answer to the problem I have presented him with tonight. He will have seen from my parliamentary questions that it has taken me eight months of painstaking research to discover the fault in the algorithm and the formula. When confronted with
Fa.b/Ra. · Fa.b/Wb + Fb.a/Rb · Fb.a/Wa
it is difficult for an ordinary hon. Member, without the facilities at the disposal of my hon. Friend, to know what is the correct answer. In this case, I did not even know the correct questions.
I have not mentioned the effect of this error. I have not dwelt on it because it has been my sole intention to prove that the Department has made a mistake in the formula calculations, rather than to recite the catalogue of disaster which will befall the Silloth area if this eror is not corrected. The Minister will know that I am referring to the loss of assisted area status, and I urge him to look at the map and see the isolated and difficult position in which Silloth finds itself. The managing director of one firm said to me:
The consequent loss of regional development status is quite serious to us, given the fact that a lot of the investment in our

company has been made possible by regional grants, and should these be lost, the long-term effects due to the high transportation costs of our product will be quite serious.
Another firm said:
We brought our business from London because of the regional assistance afforded in the area and the high quality of staff available. If the incentives are taken away, then why come?
Another firm stated:
Currently we have proposals pending, with our parent company overseas, for large capital expenditure. The receipt of approval for this expenditure. The receipt of approval from this expenditure and the securing of jobs that this will affect could be heavily dependent on the availability of grant facilities. Currenly, our overseas facilities, with their advantageous tax and grant situations, have received approval for their expenditure, which are already well advanced in action. The loss of our regional grant status could incur unfavourable comparisons and weaken the case for our 1985 capital programme, as well as in subsequent years.
I know that that is not the province of my hon. Friend, but he knows that the Department of Trade and Industry map for regional assistance is based on the figures produced by his Department for TTWAs. In my constituency, the largest in England, with 1,250 square miles. I can find many areas that I would dearly like to see quality for assisted area status, but I am restricting my request only to the town of Silloth on Solway, and for one reason only, and that is because it has been erroneously removed from the Workington TTWA and allocated to Carlisle.
I know that my hon. Friend, with his natural sense of justice and fairness, will want to correct that mistake as soon as possible. I will gladly send him the file and all the papers, and I look forward to a favourable response, if not in his reply tonight, at least when he has had a chance to study the case personally.

The Parliamentary Under-Secretary of State for Employment (Mr. Peter Bottomley): I congratulate my hon. Friend the Member for Penrith and The Border (Mr. Maclean) on the way in which he has deployed his case and for using 18 minutes of the time of the House in an excellent way. He has shown by his persistence that the electorate within his constituency were right to have him as their representative following a great by-election. Sadly I was not able to participate, but I enjoyed taking part in the by-election at Workington in a previous Parliament. I know how much the area matters to those who live in it and I am aware that strong representation is important to them. I am only sorry that there are no representatives from the alliance or Labour parties to participate in the debate. I think that my hon. Friend has made up for their absence.
I am glad that there is common ground that the first four stages of deciding travel-to-work areas are recognised as being completely satisfactory. My hon. Friend's arguments were directed to the fifth stage. I cannot give him any hope of change tonight. However, I shall ensure that all his arguments are studied seriously. He will know from a parliamentary answer given to him on 26 April that there has been only one change in the travel-to-work areas. It took place in an area some way away from Silloth on Solway and involved a change between the Swansea and Llanelli areas. That was based on a revision in the 1981 census of population data. I cannot tell my hon. Friend that


there will be a change following his representations, but if there is one it will be because of his persistence and expertise.
The House may be confused by my hon. Friend's description of the commuting links formula. It may help if I spell it out in English. Equation two is the measure of commuting link between two wards calculated as the square of the number of journeys from ward 1 to ward 2 divided by the product of the number of workers living in ward I and the number of people working in ward 2 plus the square of the number of journeys from ward 2 to ward 1 divided by the product of the number of workers living in ward 2 and the number of people working in ward 1.
Anyone who has a chance of studying the occasional supplement No. 3 of the Employment Gazette, September 1984, volume 92, No. 9, on revised travel-to-work areas will recognise equation one, which I shall give to the House. It is the weighted flow between two wards calculated by scaling up the observed flows of people in each socio-economic group between those wards by the ratio of the number of unemployed of that socio-economic group in the first ward plus the number of people of that socio-economic group working in the first ward to the number of people of that socio-economic group working in that ward. We do that for each socio-economic group.
If this is common ground and if you are still with us, Mr. Speaker, we have isolated the issues. My hon. Friend rightly drew attention to the difficulty of trying to compare the significance of a link to two decimal places compared with others to five decimal places. The House will be grateful for his algebraic and mathematical expertise. He has made the point that this issue matters a great deal to those in the Silloth area. Assisted area status matters. There are always boundary problems and he has recognised that he could have made a case—perhaps not quite so strongly — for other wards within his constituency. That is why we in the Department take these concerns seriously.
My Department has given many detailed answers to questions from my hon. Friend. We have done that, not always with delight because a fair amount of work is involved, because we recognise that it is right for him to be persistent and it is right for us to produce justifications. If it turns out that there is no justification to be given, it is for us to say so openly. I am not prepared to do that to my hon. Friend tonight even in face of the eloquence with which he advanced his case.
In essence, my hon. Friend is saying that nothing "propinqs" like propinquity. It is the closeness between wards that matters. To put it in plain English, is the airfield in the right ward? If the airfield had been in a different ward, the issue might have been far clearer from the beginning and there would not have been a chance of a 10 per cent. sample not carrying the confidence that might otherwise be attached to it. In general, a 10 per cent. sample carries a great deal of confidence and it can be said that one can rely upon it. My hon. Friend has advanced the argument that the exclusion of one census form in the 10 per cent. sample on which his case is based might have made a massive difference for those in the Silloth on Solway area. I think that I have summarised his case pretty accurately.
I reiterate my thanks to my hon. Friend for the way in which he has brought forward his contentions. If I were one of his constituents, I should be confident that no one could have done it better. He has presented his arguments with good humour but with great expertise. I assure my hon. Friend that either I or my hon. Friend the Under-Secretary of State for Employment, the hon. Member for Plymouth, Sutton (Mr. Clark), will write to him when we have had a chance of studying statistics and receiving advice from those who went further than my A-level in mathematics.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes past Ten o'clock.